P. 1
June 2010: 403(b) Plan Audits - Are You Prepared?

June 2010: 403(b) Plan Audits - Are You Prepared?

|Views: 2|Likes:
Published by SingerLewak

More info:

Published by: SingerLewak on Apr 09, 2011
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less





JUNE 2010

Jeff Holt, CPA - Partner, Assurance & Advisory Practice

For over 30 years, 403(b) plans covered by ERISA have been subject to limited Form 5500 filing requirements. In November 2007, the Department of Labor (DOL) and the Internal Revenue Service (IRS) published final regulations to remove the limited filing exemption that applied to 403(b) plans. As a result, ERISA-covered 403(b) plans will now be subject to the same Form 5500 reporting requirements as 401(k) plans, effective with their 2009 plan year end. Generally, 403(b) plans with over 100 participants will also be required to submit audited plan financial statements with Form 5500 filings.

Which 403(b) plans are affected:
• • • • • • • • Plans generally included are: 501c(3) charities Schools and universities Hospitals Plans generally excluded are: Governmental plans Church plans Certain other non-ERISA 403(b) programs (deferral only Plans that satisfy the DOL safe harbor exemption at 29CFR2510.3-2(f))

What else is required:
• Plan sponsors/employers must have an adopted written plan document that includes the following provisions: eligibility, universal availability for deferrals, contribution limits, distribution options, information about approved annuity contracts and/or custodial agreements and investment policies Provide an up-to-date summary plan description to all newly eligible employees Determine whether the plan is in compliance with IRS and DOL rules and correct any deficiencies Form 5500 must be filed electronically

• • •

How do you know if a plan needs an audit:
Since 403(b) plans have never been subjected to audit requirements in the past, many employers have not kept historical documentation on plan participants. This may present a challenge as the employer attempts to determine the number of eligible participants and the assessment of whether an audit is required. If its concluded that you do need an audit, the availability of historic plan participation data may affect the scope of work your 403(b) plan auditor is able to perform to enable the auditor to issue an opinion. On July 20, 2009, the DOL issued Field Assistance Bulletin (FAB) No. 2009-02, which communicates the DOL’s more lenient position on accepting auditor’s reports with certain scope limitations for 403(b) plan audits. Although the Bulletin lists four conditions that must be met to qualify for the enforcement relief, it does not provide audit relief. In February 2010, the DOL issued Field Assistance Bulletin (FAB) 2010-01, which supplements DOL FAB No. 2009-02 and addresses questions the DOL received concerning the scope of FAB No, 2009-02 and the safe harbor regulations at 29 CFR 2510.3-2(f). DOL FAB 2010-01 addresses, among other things, the plan administrator’s responsibility to determine whether the conditions of DOL FAB No. 2009-02 have been satisfied with respect to excluded contracts from the plan’s annual report. It states that if, as part of the audit the auditor was engaged to perform, the auditor discovers that contracts were incorrectly excluded under DOL FAB 2009-02 from the plan’s financial statements, the DOL expects that the auditor will alert the plan administrator. Plan administrators have an obligation to take reasonable steps to resolve questions concerning the exclusion of such contracts in their annual report. If the plan administrator and auditor do not agree with how to resolve issues relating to excluded contracts, the DOL expects these issues to be noted in the audit report.

What steps you should take now?
Your first step is lining up a qualified audit firm to do your initial 403(b) plan audit. You will want someone qualified in employee benefit plan audits subject to ERISA and is on top of the changes in regulations. Once you have identified the right auditor, some additional steps you should take are: • • • • • Understand how the DOL’s new financial reporting and audit requirements will affect your plan Establish internal responsibility for the plan’s reporting function Communicate with the service provider(s) on the plan’s information needs Make sure plan participant records are complete and accurate Get the plan’s books and records in shape

• • • •

Establish proper internal controls over the plan’s financial reporting process Ensure that the plan has an up-to-date written plan document Ensure that the plan is in compliance with the plan’s tax exemption Determine what 2008 comparative financial information the plan will need (may be audited, reviewed or compiled)

What is the penalty for noncompliance?
If plan sponsors fail to comply with the 403(b) plan rules, the plan could be disqualified, subjecting all plan participants to taxation on their portion of plan assets. If there is a failure to file a complete Form 5500, plan sponsors can be subject to uncapped DOL penalties of up to $1,100 per day and IRS penalties of $25 per day, capped at $15,000.

SingerLewak’s ERISA Experience
SingerLewak has performed ERISA audits for over 10 years. Our approach has emphasized quality and thoroughness, as well as providing added value to our clients by helping them better understand their plans and the related filing and compliance requirements. SingerLewak was one of the founding members of the American Institute of Certified Public Accountant’s (AICPA) Employee Benefit Plan Audit Quality Center, which was founded in March 2004 and now has over 1,800 members. This means we are committed to providing quality benefit plan audits, have established training and quality control procedures over our benefit plan practice, and perform annual internal inspections. With our expertise, our clients can be assured that their ERISA audit will be performed to the level and value of service they expect. We welcome any questions you may have. For more information, or if we can be of assistance to you, please do not hesitate contact one of SingerLewak’s Nonprofit Partners:

Stephen P. Carter - Silicon Valley SCarter@singerlewak.com Jeff Holt - Los Angeles JHolt@singerlewak.com

Lewis Sharpstone - Los Angeles LSharpstone@singerlewak.com Rob Schlener - Orange County RSchlener@singerlewak.com

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->