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I'm Monika Templeman, Director of Employee Plans Examinations.

Our EP international focus is necessitated by the increasing number of U.S. companies that have employees working abroad and in the U.S. territories.

Clearly, the global economy has an impact on employee retirement plan benefits.

Accordingly, an increasing number of EP examination cases have issues relating to the movement of funds and workers between the U.S. and the territories or overseas jurisdictions.

As globalization expands, EP is challenged by international and U.S. territory non-compliance, lack of information reporting on many cross-border transactions, complex international structures, and constantly evolving compliance issues.

The fast-paced change in the global economy requires an equally fast-paced change within the IRS Employee Plans function.

EP international activities span the gamut, from huge multinational corporations and high wealth taxpayers to money and taxpayers across the board in all formats, including IRAs maintained by retirees in the territories and overseas.

Approximately $17.4 trillion are invested in the million-plus retirement plans that cover over 90 million participants.

EP is concerned about tracking the trust assets and records and assuring they are being used exclusively as retirement benefits for plan participants.

To ensure compliance, we continue to expand coverage of international issues related to multinational corporation activities, assets sheltered offshore, and U.S. taxpayers abroad and in the U.S. territories, at all economic levels.

For purposes of Title I of ERISA, the term "United States" includes the U.S. territories such as the Virgin Islands.

Therefore, the pension law is the same for the Virgin Islands as it is for the United States.

Based on a memorandum of understanding with the Bureau of Internal Revenue in the Virgin Islands, EP agents are performing retirement plan examinations to help keep dual-jurisdiction plans in compliance.

What I'd like to share with you today are the recurring errors agents are finding in these examinations and tips -- how to find, fix, and avoid these errors.

Section 412 of ERISA requires that most plans have a fidelity bond in the name of the plan that provides insurance in the event of fraud or dishonesty.

The fidelity bond serves to protect the plan from losing any valuable assets if the people that handle the plan assets prove to be dishonest.

It covers all individuals, including fiduciaries that handle plan assets.

To find this error, review Section 412 of ERISA to determine if the plan needs to have a fidelity bond.

If so, ensure that it's in the plan's name and in the proper amount required.

The fidelity bond must be equal to at least 10% of the value of the net assets at the beginning of the year.

The maximum fidelity bond required is $500,000, unless the plan assets are invested in the sponsoring employer's securities, in which case the maximum fidelity bond is increased to $1 million.

Fix this error by obtaining a fidelity bond in the name of the plan in the amount required.

If you already have a fidelity bond, increase it to at least the 10% minimum.

To avoid this error, we recommend you review the plan assets and fidelity bond at the beginning of each plan year to ensure that the bonding requirements are met.

All plans that are subject to U.S.

Internal Revenue Code Section 401 qualification requirements need to comply with all changes in the law and be timely amended to be qualified.

The IRS establishes deadlines by which amendments that reflect law changes must be adopted.

Plans not timely amended are no longer considered qualified retirement plans and may lose their favorable tax treatment.

The IRS publishes a cumulative list of changes in plan qualification requirements toward the end of each year.

This list is found on our Website.

Review the annual cumulative list to verify that the plan has been updated to reflect all required law changes.

Fixing this error involves adopting amendments for any missed law changes.

If this error is discovered during an examination, it may be corrected by using the Audit Closing Agreement Program, which includes a sanction payment.

If the plan isn't under examination, a Voluntary Correction Program submission may be submitted to the IRS.

A fee will be charged to correct this error when using the VCP.

To avoid this error, employers should review the plan document and cumulative list annually.

Ensure that any plan amendments are executed timely.

Employers should keep signed and dated copies of the plan document and all amendments on file at all times.

If you're unsure if your plan has to be amended, consult with outside counsel or visit our Website.

The employer is responsible for contributing the amount of elective deferrals made by plan participants to the trust in a timely manner.

Department of Labor rules require that the employer deposit elective deferrals to the trust on the earliest date that the employer can reasonably segregate the amount from the employer's general assets.

Find this error by determining the earliest date deferrals can be segregated from the general assets.

Compare that date with the actual deposit dates and any plan document requirements.

You can fix this error by depositing all elective deferrals withheld and lost earnings resulted from the late deposit into the plan's trust.

Note that excise taxes do not apply to Virgin Island plans.

Therefore IRC 4975 taxes are not pursued.

Employers can avoid these errors by implementing administrative procedures to ensure that deferrals are deposited as soon as the amount can be segregated from the payroll.

If payroll and deposits are made electronically, it would be a good practice to transmit payroll and deposits at the same time.

A plan must specify how and when an employee becomes a participant.

If an employee is improperly excluded from a profit-sharing plan, they miss out on any contributions made, plus earnings, during the period of exclusion.

Failure to timely include all eligible employees in a qualified plan will cause the plan to lose its tax-qualified status.

You can find this error by reviewing the plan document sections on eligibility, participation, and plan entry dates.

Review census data to ensure that each eligible employee was timely included in the plan.

To fix this error, a corrective contribution, including earnings, must be made to the plan to account for any missed participant allocations.

In addition, if the plan is a 401(k) plan, a qualified nonelective contribution must be made to the plan to compensate for the employee's missed deferral opportunity.

Employers can avoid this error by implementing administrative procedures to ensure that employees are allowed entry into the plan according to the provisions outlined in the plan document.

A qualified defined contribution plan must meet the minimum vesting standards found in Section 411 of the Internal Revenue Code.

The minimum vesting standards are designed to ensure that an employee will vest, or be entitled to, their retirement benefit within a certain period.

Think of vesting as ownership of the participant's plan benefit.

To find this error, review the plan document and any plan amendments to determine the plan's current vesting schedule.

Next, review personnel records to determine each participant's year of vesting service.

Finally, compare your findings to each participant's vested percentage indicated in the plan records.

If no distributions have been made, you can fix this error by simply reconciling the difference.

If distributions have been made, make a corrective contribution on behalf of the participants whose account balance was improperly forfeited using the Voluntary Correction Program or the Self-Correction Program.

You can avoid this error by calculating the vesting percentage of each participant.

Review the plan document and employee data at least annually to ensure that employees are correctly credited with vesting service.

Good internal controls are vital for employers to properly maintain retirement plans.

Many employers make participant loans available in their retirement plans.

Failure to repay a plan loan may result in tax consequences.

Finding this error is done by reviewing all outstanding loans to ensure that the loans comply with the plan's terms and participants are repaying them timely.

Now, a defaulted loan is considered a deemed distribution.

When a loan goes into default, whether from participant or administrator error, a deemed distribution of the entire unpaid loan balance plus accrued interest results.

To fix this error, the employer should issue the participant a Form 1099-R for the defaulted amount.

The defaulted loan amount must be included in the participant's income.

The participant is responsible for any income tax associated with the defaulted loan.

Employers can avoid this error by implementing administrative procedures to ensure that plan loans are administered in compliance with the plan document.

These procedures should include reviewing loan agreements and loan repayments frequently to verify that payments are being made in accordance with the terms of the loan.

We'll continue to develop capabilities to address key international, global, and U.S. territory issues affecting the Employee Plans sector.

Working through and collaboratively with LB&I, which is the IRS lead division for International, our goal is to continue to expand our international enforcement coverage, identify new international issues, provide online Web materials, and, most importantly, ensure effective global and U.S. territory tax administration to better serve the Employee Plans community.

For more information, follow us on the Web at