Skoda Minotti Benefit Plan Audit Blog

Click the links below for more information on each topic.

Recent Employee Benefit Plan Developments

• Electronic Filing of Form 5500s now required
• Additional changes to 2009 Form 5500
• Fee disclosures
• 403(b) plans
• Deadline extended for certain retirement plan amendments
• EBSA's 2010 priorities
• DOL withdraws final investment advice regulations
• PBGC flat-rate increase

Accounting, Auditing and Reporting Update

• FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 [FASB ASC 740 and 805]
• FASB Statement No. 165, Subsequent Events [FASB ASC 855]
• FASB Accounting Standards Codification
• SAS No. 115, Communicating internal control related matters identified in an audit

For information, post a comment below or contact our Benefit Plan Audit Group at 440-449-6800.

Beginning with the 2009 Form 5500 filings (due in 2010), employee benefit plans that are qualified under section 403(b) of the Internal Revenue Code that are sponsored by charitable organizations and covered under the Employee Retirement Income Security Act of 1974 (ERISA) will be subject to the same reporting and audit requirements that currently exist for section 401(k) plans.

What does this mean for affected organizations? It most likely means that they face significant challenges with:

• Establishing plan accounting records and proper controls
• Identifying all participant accounts to be included as plan assets
• Determining beginning account balances (i.e. - comparative balances are also required as of December 31, 2008 for calendar year plans)
• Obtaining other financial information to be included in the plan’s financial statements
• Obtaining an unqualified opinion on the plan’s financial statements from an independent auditor.

If you are affected by these new regulations, we recommend that you review “403(b) Plans – 2009 Frequently Asked Questions.”

We are able to assist you at any stage of your transition process.   Our Skoda Minotti Benefit Plan Audit Department has vast experience auditing employee benefit plans and would be happy to provide you a quote for your upcoming 403(b) plan audit. For more information, please contact us at 440-449-6800.

With the end of the year approaching many companies are asking questions related to their business, such as "How can we cut costs?" How can we save time?" and "How can we add value to our processes?" These same questions also apply to a company’s employee benefit plan. Many companies don’t take the time throughout the year to evaluate their plan and any changes that should be made to it. The end of the year is a great time to analyze the plan for any changes that can take place during the next year to minimize costs or add value to the plan. There are a few basic questions companies can ask themselves to make sure they understand what needs to happen relating to the plan over the next year. 

The first question a company should ask is, does the benefit plan need to have an annual audit? Many companies fall within the parameters of needing an annual audit but are unaware that they do. Who needs an employee benefit plan audit?  Any defined contribution, defined benefit or health and welfare plan with over 100 eligible participants as of the beginning of the plan year are generally required to have an annual audit.  These plans are considered to be large plans and are required to complete Schedule H as part of the Form 5500 annual filing. There are certain exceptions to the rules that may waive the plan audit requirement. The exceptions relate to certain welfare benefit plans, plans containing insurance contracts, plans with short plan years or plans with participant counts between 80 and 120 participants. 

When is the audit performed? The audits are typically performed 5 to 9 months after the Plan's year end and coincide with the due date of the Form 5500 filings.  The auditor will typically perform fieldwork at the company’s offices to review various plan documents to make sure the plan is operating properly. They will then issue financial statements to the company along with recommendations for improvements relating to the plan. What are the due dates? The Form 5500 for a calendar year-end plan is due July 31^st of the following year but can receive a 2 ½ month extension which brings the extended due date to October 15^th.  The audit report mentioned above is attached to, and filed with, the Form 5500.

Once you have determined that your organization is in need of a benefit plan audit, the next step is to select a plan auditor. Some things to keep in mind when selecting a plan auditor:

• Experience counts: Does the firm have extensive experience performing financial statement audits for all types of retirement and employee benefit plans (both for publicly traded and privately owned businesses)?
• Look for added value: Do not look at your plan audit as a costly, last minute, once-a-year activity. When conducted by an experienced firm, a plan audit can help you in identifying areas of deficiency and assist you in streamlining your plan.
• After the audit: Once the audit is complete, your auditors should be able to assist with benefit plan design, operation, performance and reporting to ensure your company and your employees are obtaining the maximum possible value from what may be the largest benefit you provide.
• Find a resource: Your auditor should provide you with updates throughout the year with news and information related to your plan.
• Is the audit firm a member of the AICPA Employee Benefit Plan Audit Quality Center? This resource can be used for training, research and guidance throughout the benefit plan audit process.

The second question a company should ask relates to plan expenses. Is the plan paying reasonable expenses? There are various expenses incurred in the operation of a plan relating to the third party administration fees, loan and distribution fees and investment management and advisory fees. Some fees are paid by the plan and others are paid by the company. Fees can be broken out separately in the plan or they may be paid through the funds in which the plan invests. These fees should be reviewed to make sure they are reasonable based on the plan size and investment options offered by the plan.

The final question relates to the plan’s third party administrator (TPA). Is the TPA reviewing the plan on a yearly basis to make sure the plan is operating properly? Are there any changes that need to be made to the plan document based on new regulations or a change in circumstances at the company? Are they routinely meeting with the fiduciary and plan participants to make sure they understand the operations of the plan and all of the plan benefits offered to them?

By simply evaluating the questions above, a company will know up front what issues they will be facing relating to their plan over the next year and what changes they should implement now to make sure they are providing a high quality service at a low cost to their plan participants.

Looking for assistance with your benefit plan audit? Contact us at 440-449-6800 or visit our web site for more information.

The Internal Revenue Service recently issued substantial guidance designed to boost retirement savings, including:

• Changes to automatic retirement plan contributions;
• Contributions of unused paid time off to be contributed to a retirement plan; and
• A detailed explanation of tax-free rollover options.

The guidance is found in several rulings identified below. You can access the rulings by following this link.

Summary of Changes

1. Automatic Contribution Increases under Automatic Contribution Arrangements

In February 2009, the Service and Treasury issued final regulations explaining 401(k) automatic contribution arrangements. In furtherance of these regulations, the Service issued Rev. Rul. 2009-30. In this ruling, the Service clarified two matters with respect to automatic, or default, contributions. First, the ruling makes it clear that default contributions to a profit-sharing plan may provide that an eligible employee's default contribution percentage automatically increases in plan years after the first plan year of participation in the automatic contribution arrangement based in part on increases in his plan compensation. Second, the ruling also permits the default contribution percentage for all eligible employees to increase on a date other than the first day of a plan year.

The Service also issued three notices relating to automatic enrollment in qualified plans, as follows:

• Notice 2009-65, 2009-39 IRB __: Facilitates automatic enrollment by providing two sample amendments that sponsors of 401(k) plans can use to add automatic enrollment features to their plans.
• Notice 2009-66, 2009-39 IRB __: Facilitates automatic enrollment in SIMPLE IRA plans, including questions and answers relating to the inclusion in a SIMPLE IRA plan of an automatic contribution arrangement.
• Notice 2009-67, 2009-39 IRB __: Facilitates automatic enrollment by providing a sample plan amendment that a prototype sponsor of a SIMPLE IRA plan (using a designated financial institution) can use in drafting an amendment to add an automatic contribution arrangement to the SIMPLE IRA plan.
  
  

2. Contributions of Unused Paid Time Off (PTO) to 401(k) Plans

The Service issued two rulings relating to contribution of unused PTO to 401(k) plans. In Rev. Rul. 2009-31, the Service concluded that a 401(k) plan may require or permit the dollar equivalent of unused paid time off at year end to be contributed to the plan. In Rev. Rul. 2009-32, the Service held that a tax-qualified retirement plan may permit contribution of the dollar equivalent of unused paid time off at termination of employment.

3. Tax-Free Rollover Options

In response to concerns that a key risk to lifetime savings occurs when employees spend a lump-sum retirement plan payout, instead of electing to roll it over to an IRA or other retirement plan, the Service issued Notice 2009-68 to provide rollover guidance. The Notice:

• Provides two safe harbor explanations (one for payments from a designated Roth account and one for payments not from a designated Roth account) that plans can provide for eligible rollover distributions in order to satisfy the required notice provisions of section 402(f); and
• Explains choices available to employees receiving an eligible rollover distribution.

Note: The Administration also pressed for Congress to adopt proposals calling for automatic IRAs, namely, two retirement savings proposals included in the President's 2010 budget proposal for employers who does not offer retirement plans, along with matched retirement savings for lower income workers.

Looking for assistance with your benefit plan audit? Contact us at 440-449-6800 or visit our web site for more information.

Information Courtesy:


 

This is a friendly reminder that any Form 5500 on extension needs to filed by October 15^th. This applies to calendar year plans.

If your plan has more than 100 eligible employees, you may need to attach audited financial statements for the plan to the Form 5500.   

Looking for assistance with your benefit plan audit? Contact us at 440-449-6800 or visit our web site for more information.
 

Suspension of Required Minimum Distribution Requirement 

One of the many provisions in the Worker, Retiree, and Employer Recovery Act, which was signed into effect in December 2008 by then President Bush, provided for a one-year suspension of the required minimum distribution ("RMD") payments for certain retirement plan accounts.

Under current law, the RMD rules provide that participants in "qualified plans" and individual retirement arrangements ("IRAs") are generally required to begin taking distributions of their accounts no later than April 1 of the year after they attain age 70 ½. However, where an individual is still actively employed and is not a five-percent owner of the employer maintaining the retirement plan, commencement of the distribution of the RMD is delayed to April 1 of the year subsequent to the individual’s retirement.

As a result of the suspension, RMDs that would otherwise have been made for the 2009 plan year are no longer required. This relief applies to 2009 RMD payments only. Any 2008 RMD payments for participants who attained age 70 ½ in 2008 and deferred payment until April 1, 2009, are not excluded. 

Final Rule on Investment Advice Exemption for 401(k) Plans and IRAs

The DOL published a final rule in January 2009 to make investment advice more accessible for participants in 401(k) plans and IRAs. The rule includes a regulation that implements the new statutory exemption for investment advice added to ERISA by the Pension Protection Act of 2006 ("PPA"). The PPA amended ERISA by adding a new prohibited transaction exemption that allows greater flexibility for investment advisors to give advice to participants of 401(k) plans and IRAs.

Automatic Contribution Arrangements

In February 2009, the Treasury Department published final rules related to the automatic contribution arrangements. The final rules clarified the effects of mid-year increases in the default contribution percentage under qualified automatic contribution arrangements ("QACA"). An eligible automatic contribution arrangement ("EACA") is a feature in a 401(k) plan that provides for automatic enrollment of a uniform default percentage for all covered employees who do not have an affirmative deferral election in effect. Originally, it was to be applied uniformly to all employees. These final regulations allow employers to specify in the plan document the employees that will and will not be covered by the EACA. It permits multiple EACAs with different default deferral percentages. A participant in an EACA must request withdrawal within 90 days of the first pay date upon which the deferrals were withheld. Under the PPA the QACA is effective for plan years beginning in 2008 or later and EACA on or after January 1, 2010.

Suspension of Safe Harbor Non-elective Contributions

In May 2009, proposed regulations issued by the Internal Revenue Service ("IRS") permit plan sponsors of 401(k) safe harbor retirement plans to suspend or reduce safe harbor non-elective contributions mid-plan-year when they experience a substantial business hardship. These proposed regulations do not allow for the suspension of safe harbor matching contributions. Previously, plans were only permitted to cease safe harbor non-elective contributions upon termination of the plan for specified situations. The proposed regulations are effective for amendments adopted after May 18, 2009 and, according to the IRS, may be relied upon for guidance pending the issuance of final regulations.

2009 Form 5500

Plans and service providers will be required to comply with the changes to the 2009 Form 5500 and the electronic filing of the Form 5500 on the due date for the Plan’s 2009 Form 5500.

Among the changes to the 2009 Form 5500 are:

• A new simplified annual reporting form for small plans with easy to value investments;
• Expanded reporting by large plans of compensation received by plan service providers (See Fee Disclosures article on page 4);
• Realignment of the reporting rules for Internal Revenue Code section 403(b) pension plans subject to Title I of ERISA to make them on par with 401(k) plans; and
• Annual reporting changes required by the PPA for defined benefit pension plans and multiemployer plans.

The DOL, IRS and the Pension Benefit Guaranty Corporation ("PBGC") created the ERISA Filing Acceptance System

("EFAST") to streamline the Form 5500 and the method by which it is filed and processed. The EFAST system is being replaced. The new filing system, EFAST2, will receive only electronic filing submissions (including the independent auditors’ report in pdf format) and will not accept paper filings. Any such paper filings will not be processed and will be returned to the filer.

To assist plan sponsors and service providers in preparing for the changes to the Form 5500 and the electronic filing requirement, the DOL has scheduled a series of webcasts and other educational outreach programs throughout 2009. The 2009 Form 5500 package and the related Federal Register notices are available on the DOL’s EBSA EFAST web site at www.efast.dol.gov.

Information Courtesy:

If your organization utilizes a 403(b) benefit plan, you most likely know of the recent changes to the Form 5500 reporting and audit requirements.
  

After reviewing these changes, many plan administrators had expressed concern that the historical treatment of 403(b) plans as a collection of individual contracts with respect to which employees could engage in a series of actions without the involvement or consent of a plan administrator or employer could make it costly, and in some cases impossible, to identify and obtain the financial information about certain pre-2009 contracts and custodial accounts to which the employer is no longer making employee contributions or forwarding employee salary reduction contributions.

In response to the concerns, the Department of Labor released the Field Assistance Bulletin, which provides transitional relief for 403(b) plan administrators that make "good faith efforts" to comply with the new reporting requirements for the 2009 plan year.

The relief is limited to the Form 5500 reporting requirements, including the requirement for large plans to include as part of their annual report the audit report of an independent qualified public accountant.

For complete details on the transition relief, click here to read more. 

Looking for assistance with your benefit plan audit? Contact the CPA’s, business and financial advisors at Skoda Minotti at 440-449-6800.

This week is our final update in our series on the changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

2009 Cost of Living Adjustments for Qualified Retirement Plans

The Internal Revenue Service announced cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2009.

Click here for more of this article.

Looking for assistance with your benefit plan audit? Contact the CPA’s business and financial advisors at Skoda Minotti at 440-449-6800.

In a continuation of our benefit plan audit series, over the next few weeks, we’ll continue updating you on changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

Guidance on ERISA's Fidelity Bonding Requirements

Have you ever wondered what the bonding requirements for your plan under ERISA are or the impact of the PPA on such requirements, or if your company's fiduciary liability insurance covers ERISA's bonding requirements (it may not)? Well, you are not alone. As a result of numerous questions raised concerning the bonding requirement, the DOL Employee Benefits Security Administration issued Field Assistance Bulletin No. 2008-04, Guidance Regarding ERISA Fidelity Bonding Requirements (the "Bulletin"), in November 2008. This Bulletin provides guidance, in a question and answer format, concerning the application of ERISA's bonding requirements and the PPA's changes thereto.

Click here for more of this article.

Looking for assistance with your benefit plan audit? Contact the CPA’s business and financial advisors at Skoda Minotti at 440-449-6800.

In a continuation of our benefit plan audit series, over the next few weeks, we’ll continue updating you on changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

403(b) Plans

In November 2007, the DOL issued amendments to the Form 5500 - Annual Return/Report of Employee Benef it Plan - for the 2009 plan year. One of the changes eliminated the exemption granted to Internal Revenue Code ("IRC") §403(b) retirement plans of IRC §501(c)(3) organizations, from the Form 5500 reporting, disclosure and audit requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. The removal of this exemption subjects ERISA-covered 403(b) plans to the same Form 5500 reporting and audit requirements as §401(k)-type plans.

Click here for more of this article.

Looking for assistance with your benefit plan audit? Contact the CPA’s, business and financial advisors at Skoda Minotti at 440-449-6800.

In a continuation of benefit plan audit series, over the next few weeks, we’ll continue updating you on changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157") to provide enhanced guidance for using fair value to measure assets and liabilities. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. This standard clarifies the definition of fair value and expands financial statement disclosures about the use of fair value measurements.

Click here for more of this article.

Looking for assistance with your benefit plan audit? Contact the CPA’s business and financial advisors at Skoda Minotti at 440-449-6800.

With the current difficult economic times and the changing rules and regulations from the Department of Labor ("DOL"), Internal Revenue Service ("IRS") and other regulators, it is essential that companies understand the impact on their benefit plans and their benefit plans’ audits. This is why, over the next few weeks, we’ll be updating you on changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

New Temporary Pension Funding Relief

On December 23, 2008, President Bush signed the Worker, Retiree and Employer Recovery Act of 2008 (the "Act"). Among other provisions, the Act provided technical corrections to the Pension Protection Act of 2006 ("PPA") and provided relief for defined benefit sponsors to ease their pension funding obligations over the next few years. Revisions to the PPA allow companies to smooth out unexpected asset losses arising from current economic conditions when determining how much they must contribute to reach required funding levels.

Looking for assistance with your benefit plan audit? Contact the CPA’s business and financial advisors at Skoda Minotti at 440-449-6800.