Defined contribution plan

IRS Extends Nondiscrimination Relief for Certain Closed Defined Benefit Plans

The IRS has issued Notice 2019-49, guidance that extends existing nondiscrimination testing relief available to certain defined benefit (DB) pension plans that are closed to new participants. The guidance is intended to aid sponsoring employers that are maintaining a DB plan for certain current employees, but commonly offer only a defined contribution (DC) plan—such as a profit sharing-401(k) plan—to new employees. In the absence of such relief, these DB plans could fail nondiscrimination testing because of the limitations on participation. Notice 2019-49 extends the current relief to cover plan years that begin before 2021. (Permanent relief has been proposed in retirement enhancement legislation that has not yet been enacted.)


OMB to Review Proposed DOL Guidance on Retirement Plan Disclosures

The Office of Management and Budget (OMB) has received for review Department of Labor (DOL) new proposed regulations on procedures for satisfying retirement plan disclosure requirements. These regulations are the DOL’s response to an Executive Order issued by President Trump in August 2018, in which the President asked the agency to seek regulatory means of simplifying compliance with retirement plan disclosure obligations.

Based on comments attributed to DOL sources, many expect these regulations to address the potential for greater use of electronic delivery of required plan disclosures, something that has been a longstanding initiative of retirement plan service providers.

While no legal deadline for completing review of this guidance is noted in the OMB website posting, it is generally expected that OMB’s review would be completed within 30–90 days, after which the guidance will be published in the Federal Register.


IRS Publishes Corrections to MEP “Bad Apple” Proposed Regulations

Several corrections to IRS proposed regulations on multiple employer plans (MEPs) were published in the Federal Register. Originally published on July 3, 2019, this proposed guidance would revise 1979 IRS final regulations on MEPs—arrangements under which several employers elect to participate in a common plan.

A key revision being proposed in these regulations addresses the so-called “bad apple” rule, under which an entire MEP could fail to meet qualification requirements because of a compliance failure by one employer. This is known formally as the “unified plan rule.” These regulations propose an exception to the unified plan rule and—if certain requirements are met—compliance failures by individual participating employers need not jeopardize the entire MEP.

Most of the corrections published in the Federal Register are of a grammatical or punctuation nature, or a minor omission, such as failing to precede an Internal Revenue Code citation with the word “Section.” However, one substantive change corrects an omission in the preamble (page 31788) to these proposed regulations. Added by the correction is the parenthetical reference “(and their beneficiaries”) to a proposed notification requirement.

Specifically—in the event of a compliance failure by a participating MEP employer—a notification must be sent by the MEP plan administrator to participants if that participating employer has proven unresponsive. The proposed regulation states that such notices must be provided to beneficiaries, as well. However, the preamble as published did not include a reference to beneficiaries. The correction now being made aligns the preamble with the regulation itself.


OMB to Review Proposal to Revise RMD and Beneficiary Life Expectancy Tables

The Office of Management and Budget (OMB) has received for review proposed Treasury/IRS regulations that would update life expectancy and distribution period tables used when calculating required minimum distributions (RMDs) from retirement savings arrangements, including required distributions to beneficiaries. According to its website, the OMB reviewed the proposal on August 13. While no legal deadline for completing review of the guidance is listed, it is generally expected that OMB’s review would be completed within 60–90 days, after which the guidance would be expected to be published in the Federal Register.

This proposed update to the life expectancy and distribution period tables is in response to an Executive Order issued by President Trump in August 2018. In that Executive Order, the President directed the Treasury Department and the Department of Labor to seek regulatory avenues for enhancing retirement saving opportunities. Specifically recommended were updating the above-described distribution tables to reflect longer life expectancies (tables last updated in 2002), enhancing opportunities for employers to participate in multiple employer plans (MEPs), and simplifying retirement plan disclosure processes.


IRS Guidance Addresses Retirement Plan UnCashed Check Withholding, Reporting

The IRS has issued Revenue Ruling 2019-19, which addresses the responsibilities of retirement plan administrators when a distribution check that represents a taxable amount is issued to a plan participant, but remains uncashed. The facts and circumstances described in the guidance define the distribution as not including designated Roth account (e.g., Roth 401(k)) amounts—which are potentially tax-exempt—or other amounts not subject to normal taxation.

The guidance notes the following.

  • The check amount is taxable in the year received by the recipient, whether cashed or not.
  • Plan administrator obligations for withholding—and remitting of withholding—are not altered by whether the check is cashed.
  • The recipient’s failure to cash the check does not alter the plan administrator’s requirement to report the distribution on IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (reporting is required for distributions of $10 or more).

Washington Pulse: Final Regulations Expand MEP Options

In 2018, roughly 38 million private-sector employees did not have access to a retirement plan*. This troubling statistic led the Trump Administration to issue an Executive Order, directing the Department of Labor (DOL) and the Treasury Department to issue guidance that would help increase participation levels in employer-sponsored retirement plans.

On July 31, 2019, the DOL fulfilled this directive by releasing final regulations on association retirement plans (ARPs)—also known as multiple employer plans, or MEPs. A MEP typically allows multiple employers to participate in a single retirement plan, which may—among other things—help reduce plan administrative and fiduciary responsibilities for participating employers. The final regulations are substantially similar to the proposed regulations, which were covered in detail in a previous Washington Pulse.

 

Why the Final Regulations are Important

One of the most important outcomes of the final regulations is the expanded interpretation of the term “employer.” The current definition of “employer” under ERISA Section 3(5) is unclear because the term “group or association of employers” is not defined. As a result, many in the retirement industry have relied on various DOL advisory opinions that seemed unnecessarily narrow.

The final regulations clarify that a “bona fide group or association of employers,” and a “bona fide professional employer organization” that satisfy certain criteria are deemed to be able to act in the interest of an employer for MEP purposes. Although the final regulations expand the term “employer,” the guidance does not create “open MEPs,” under which multiple participating employers share no common characteristic, affiliation, or purpose (as has been proposed in pending legislation).

 

Commonality of Interest Requirement Remains

To qualify as a “bona fide group or association of employers,” the group or association of employers must meet seven requirements—one of which is the “commonality of interest” requirement. To meet this requirement, the employers within the group or association must

  • be in the same industry, trade, line-of-business, or profession; or
  • have a business in the same region.

The DOL is taking a “middle-of-the-road” approach toward expanding or restricting the commonality requirement. Responding to the proposed regulations, some commenters asked the DOL to impose a less restrictive test by eliminating the commonality of interest requirement. The elimination of this requirement would essentially allow groups or associations of employers to form open MEPs. The DOL, however, decided to keep the commonality of interest requirement. Although this provision is not required by statute, the DOL believes that keeping this requirement is important for several reasons—one of which is that it aligns the final ARP regulations with the final association health plan (AHP) regulations.

In the preamble to the final ARP regulations, the DOL stated that it would “construe[ ] broadly” what constitutes an industry, trade, line-of-business, or profession. The DOL believes that this broad interpretation will help expand access to MEPs. The DOL also indicated that, in general, it will not challenge

  • any “reasonable and good faith” industry classification or categorization of employers, or
  • the inclusion of businesses that share an economic or representational interest with other members of the group or association.

 

Special Rules for Owner-Employees

The 2018 Executive Order directed the DOL to consider how working owners (e.g., sole proprietors without employees) might be included in MEP arrangements. The final regulations clarify that working owners without common law employees may consider themselves to be both an employer and an employee, and therefore eligible to participate in a MEP. To qualify for MEP participation, an owner-employee must 1) have an ownership interest in the trade or business, 2) have income from providing personal services to the trade or business, and 3) meet minimum work hours or earnings tests.

 

New PEO Requirements
Under the final regulations, a professional employer organization (PEO) must meet four requirements in order to qualify as a “bona fide PEO.” A bona fide PEO may act as an “employer” for purposes of sponsoring a MEP that covers the employees of its client employers. To qualify as a bona fide PEO, a PEO must

  • perform substantial employment functions for its client employers;
  • have substantial control over the MEP’s functions and activities and continue to have employee-benefit-plan obligations to MEP participants after the contract between the PEO and its client employers ends;
  • ensure that each client employer has at least one participant covered under the MEP; and
  • limit MEP participation only to current and former employees of the PEO and the PEO’s client employers, to former client employers, and to beneficiaries.

Whether a PEO performs “substantial employment functions” on behalf of its client employers is generally based on the facts and circumstances. But PEOs needing more regulatory certainty can take advantage of a new safe harbor, which is separate from the facts-and-circumstances test. (The proposed regulations contained a complicated regimen of safe harbors; the final regulations contain a single, simplified safe harbor with four conditions that PEOs must meet.)

 

Miscellaneous Provisions

 

Severability Provision Provides Safety Net
The final ARP regulations include a severability clause. Under this clause, if any provisions are found to be unenforceable, or stayed by court action, the remaining provisions of the regulations would remain operative and enforceable. (The regulations include examples of how this severability provision would be applied.)

The severability clause is similar to the one found in the final AHP regulations, which were released in June 2018. Since then, the final AHP regulations have encountered legal obstacles—including having certain provisions vacated by the U.S. District Court for the District of Columbia. Whether the ARP guidance generates similar concerns remains to be seen.

 

States Can Still Establish MEPs

The DOL received numerous comments questioning how the final regulations would affect other guidance—including DOL Interpretive Bulletin 2015-02, which gives states the authority to establish state-facilitated MEPs. The DOL clarified that, although the final regulations do supersede other preexisting DOL guidance, the regulations do not supersede this interpretive bulletin.

 

Open MEPs Still a Possibility

Although the final regulations don’t allow for open MEPs, the DOL has not ruled out future rulemaking that may permit them. Following the release of the proposed regulations, the DOL received approximately 60 comments; more than half of those comments addressed this issue, and the majority supported the creation of open MEPs or pooled employer plans.

Because of the comments received, the DOL has issued a request for information (RFI) that asks for responses on several questions addressing such issues as 1) the cost and complexity of open MEPs, 2) whether the DOL should allow financial institutions to sponsor open MEPs for unrelated employers, and 3) whether the DOL should expand its regulatory definition of employer to include “corporate MEPs” and affiliated service groups.

Although not officially defined, a corporate MEP typically consists of a plan that covers a group of employers related by some level of common ownership—but not enough ownership to constitute a controlled group or affiliated service group. There were three reasons the DOL included corporate MEP questions in the RFI.

  • To obtain information on the level of common ownership that would indicate enough genuine interests to permit members to act in the interests of other group members for purposes of sponsoring a MEP.
  • To determine whether the DOL should consider other facts and circumstances in addition to the level of common ownership between employers.
  • To determine what criteria two or more tax-exempt organizations or a tax-exempt organization and another organization must meet to be considered an employer under ERISA Section 3(5).

 

No Additional Reporting Requirements

The proposed regulations solicited comments on whether it should modify the current reporting and disclosure requirements. Because of the comments received, the DOL decided not to modify the current reporting and disclosure requirements. It also clarified that the MEP plan administrator is responsible for meeting these requirements.

 

The Pros and Cons of Joining a MEP

Some employers may benefit from joining a MEP—especially smaller employers that may not have the time or money to offer their own retirement plan. For example, participating employers may benefit by delegating plan duties to the MEP plan sponsor, incurring less fiduciary liability and sharing reporting responsibilities. But MEPs may not provide a substantial benefit to all who join. For example, proponents claim that participating employers could file one Form 5500 information return collectively. While this is true, many small employers don’t have to file this form, so this benefit could be minimal at best. Cost savings is another commonly perceived benefit. But because plan administration fees and investment fees have lessened in recent years, employers may not incur substantial cost savings after joining a MEP.

 

More to Come . . .

This year has seen a substantial increase in MEP-related activity. In addition to the DOL’s final regulations, the IRS released proposed regulations eliminating the “one bad apple rule,” which would provide an important improvement for MEPs. And earlier this year the U.S. House of Representatives passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. If enacted, this proposed legislation would eliminate the current commonality requirement—resulting in open MEPs.

While the final ARP regulations may not go as far as some in the industry would like, the regulations do give employers participating in MEPs more certainty about their status under ERISA. And based on the information contained in the RFI, it appears that the DOL is at least preparing for the possibility of open MEPs sometime in the future.

The final ARP regulations are effective September 30, 2019. Those looking for additional information may refer to the DOL’s fact sheet. And, as always, visit ascensus.com for any new developments.

* “National Compensation Survey: Employee Benefits in the United States”, The U.S. Department of Labor’s Employee Benefits Security Administration, March 2018

 

Click here for a printable version of this edition of the Washington Pulse.


Service Provider’s Auto-Portability Proposal Receives DOL Blessing

The Department of Labor’s Employee Benefit Security Administration (EBSA) has published in the Federal Register a prohibited transaction exemption (PTE) granted to a service provider that has proposed what it describes as an automatic portability program for retirement plan assets.

This exemption—PTE 2019-02—was considered necessary so that Retirement Clearinghouse (RCH) could receive fee compensation in connection with the services it intends to provide in this automatic portability program. In general, receipt of such fees would be considered a prohibited transaction, but the EBSA will approve individual applications for exemptions when they meet certain criteria. PTE 2019-02 is granted to RCH for a period of five years.

The RCH program contains essentially two elements.

  • Based on agreements between RCH, participating employer plans, and participating third-party recordkeepers, certain retirement plan small balance cash-out amounts and terminating plan accounts would be automatically rolled over to an “RCH default IRA,” or to a “default IRA” of a participating recordkeeper; this would occur unless the plan participant affirmatively elected otherwise.
  • Subsequently, RCH would—by means of data matching searches—determine whether the IRA owner is participating in another employer plan that accepts rollovers. If the default IRA owner does not affirmatively consent or object, the IRA balance would be automatically rolled over to that new employer’s plan.

 

Process Began With EBSA Advisory Opinion

In November 2018, RCH applied to EBSA for an advisory opinion that would address not the receipt of fees, but instead asked EBSA to address the fiduciary status of RCH and other parties to the auto-rollover program.

The EBSA answered RCH’s inquiry on fiduciary status in Advisory Opinion 2018-01A, published in the November 5, 2018, Federal Register. EBSA simultaneously published in the Federal Register a notice of proposed prohibited transaction exemption (PTE), and invited comments on this PTE request, which it accepted through December 24, 2018.

In its granting of PTE 2019-02 now to RCH, the EBSA noted that there were several commenters who objected to an exemption, these stating that there are multiple reasons why such asset transfers should be done only as affirmative actions on the part of an account owner.

In explaining its decision to grant PTE 2019-02, the EBSA noted that its regulations permit fiduciaries to transfer small account balances to default IRAs “only if protective conditions are met,” and that the exemption now being granted contains “additional conditions applicable for [such] transfers … under the RCH program.”

PTE 2019-02 also prescribes the following.

  • A plan fiduciary that is independent of RCH must review the terms of the RCH program and determine, consistent with its duties under Section 404 of ERISA, that the plan’s participation in the RCH program is prudent.
  • All fees must be approved by the responsible plan fiduciary of the old employer plan.
  • RCH has no authority to unilaterally change these fees, and all fees under the RCH program must not exceed reasonable compensation.

Association Retirement Plan (a.k.a. MEP) Final Regulations and RFI in Today’s Federal Register

Today’s Federal Register contains the Department of Labor (DOL) final regulations and a Request for Information pertaining to association retirement plans, also known as multiple employer plans (MEPs).

The final regulations provide guidelines under which more than one employer may be treated as a single employer for purposes of retirement plan participation. An important objective of such arrangements is the sharing of plan administration responsibilities and, potentially, costs, for a retirement plan that covers eligible employees of the participating employers.

The guidance does not create or legitimize so-called “open MEPs,” under which multiple participating employers share no common characteristic, affiliation, or purpose (as has been proposed in pending legislation). But this guidance—a response to an August 2018 Executive Order issued by President Trump—would broaden the circumstances under which MEP formation could take place.

Final regulations on association health plans were previously published and have encountered legal obstacles. Whether there will be similar issues with this association retirement plan guidance remains to be seen.

In this guidance the DOL states that “expanding access to workplace retirement plans is critical to helping more American workers financially prepare to retire.” Like the proposed regulations, this guidance applies only to defined contribution retirement plans. The final regulations have no superseding effect on DOL Interpretive Bulletin 2015-02, which gave states the authority to establish state-facilitated MEPs.

The final regulations are substantially similar to the proposed regulations. Highlights include the following.

Bona Fide PEO

The final regulations (like the proposed) include four requirements for a professional employer organization (PEO) to qualify as a “bona fide” PEO that may act as an “employer” under ERISA Section 3(5) for purposes of sponsoring a MEP covering the employees of client employers. One of these four requirements requires the PEO to perform “substantial employment functions” on behalf of the client employers.

Whether a PEO performs “substantial employment functions” on behalf of its client employers is generally determined based on facts and circumstances. But in an effort to provide regulatory certainty, the final regulations contain a safe harbor separate from the facts-and-circumstances test. This safe harbor has been simplified in the final rule.

The final rule contains only one safe harbor for all PEOs. Instead of nine criteria, the new safe harbor contains only four criteria. And instead of allowing a PEO the choice of selecting five from among the nine criteria, the new safe harbor requires that the PEO satisfy all four criteria.

Severability

The final regulations include a severability provision, which provides that if any of the provisions are found to be unenforceable, or stayed by court action—pending further agency action—the remaining provisions of the regulations would remain operative and available. (The regulations include examples of how this severability provision would be applied.)

 


DOL Issues Association Retirement Plan (a.k.a. MEP) Final Regulations

Scheduled for publication in the Federal Register this week are Department of Labor (DOL) final regulations on association retirement plans, a name that in very general terms equates to multiple employer plans, or MEPs. In addition to the final regulations, the DOL has issued a companion request-for-information document, “Open MEPs” and Other Issues.

The final regulations provide guidelines under which more than one employer may be treated as a single employer for purposes of retirement plan participation. An important objective of such arrangements is the sharing of plan administration responsibilities and, potentially, costs, for a retirement plan that covers eligible employees of the participating employers.

The guidance does not create or legitimize so-called “open MEPs,” under which multiple participating employers share no common characteristic, affiliation, or purpose (as has been proposed in pending legislation). But this guidance—a response to an August 2018 Executive Order issued by President Trump—would broaden the circumstances under which MEP formation could take place.

Final regulations on association health plans were previously published and have encountered legal obstacles. Whether there will be similar issues with this association retirement plan guidance remains to be seen.

In this guidance the DOL states that “expanding access to workplace retirement plans is critical to helping more American workers financially prepare to retire.” Like the proposed regulations, this guidance applies only to defined contribution retirement plans. The final regulations have no superseding effect on DOL Interpretive Bulletin 2015-02, which gave states the authority to establish state-facilitated MEPs.

The final regulations are substantially similar to the proposed regulations. Highlights include the following.

Bona Fide PEO

The final regulations (like the proposed) include four requirements for a professional employer organization (PEO) to qualify as a “bona fide” PEO that may act as an “employer” under ERISA Section 3(5) for purposes of sponsoring a MEP covering the employees of client employers. One of these four requirements requires the PEO to perform “substantial employment functions” on behalf of the client employers.

Whether a PEO performs “substantial employment functions” on behalf of its client employers is generally determined based on facts and circumstances. But in an effort to provide regulatory certainty, the final regulations contain a safe harbor separate from the facts-and-circumstances test. This safe harbor has been simplified in the final rule.

The final rule contains only one safe harbor for all PEOs. Instead of nine criteria, the new safe harbor contains only four criteria. And instead of allowing a PEO the choice of selecting five from among the nine criteria, the new safe harbor requires that the PEO satisfy all four criteria.

Severability

The final regulations include a severability provision, which provides that if any of the provisions are found to be unenforceable, or stayed by court action—pending further agency action—the remaining provisions of the regulations would remain operative and available. (The regulations include examples of how this severability provision would be applied.)


Retirement Spotlight: Making Sense of the New Auditing Standard for ERISA Plans

On July 10, 2019, the American Institute of Certified Public Accountants (AICPA) issued formal guidance for those who audit financial statements that are included with Form 5500, Annual Return/Report of Employee Benefit Plan, filings. The AICPA first proposed this guidance in April 2017, following a request by the Department of Labor (DOL) to improve the quality of employee benefit plan audits. This guidance, released in a new Statement on Auditing Standards No. 136 (SAS 136), will apply to audits for reporting periods ending on or after December 15, 2020.

 

What is AICPA’s Role with ERISA Plans?

Founded over 130 years ago, the AICPA is the world’s largest member association representing accounting professionals. Many view the AICPA as an important source of guidance for the accounting profession. Aside from developing audit standards, the AICPA provides educational materials, creates and evaluates CPA exams, and ensures that technical and ethical standards are maintained. The AICPA has also established an Employee Benefit Plan Audit Quality Center to help CPAs meet the various challenges of performing plan audits.

 

When is an ERISA Plan Audit Required?

Before detailing the AICPA guidance, a quick review of the plan audit requirements may help. Plan sponsors whose plans are not subject to the Employee Retirement Income Security Act (ERISA) do not need to provide audit results to the DOL. This group includes most church plans and owner-only plans. In addition, smaller plans that meet certain waiver requirements are not subject to the Form 5500 audit requirements. But an employee benefit plan is subject to an independent audit if the plan

  • had 100 or more eligible participants as of the first day of the plan year and did not file as a small plan filer for Form 5500 reporting in the prior year, or
  • filed as a small plan filer for Form 5500 reporting in prior years but now has 121 or more eligible participants as of the first day of the current plan year.

An “eligible participant” is an employee who is eligible to participate in the plan (even if not deferring), or has terminated employment but still has a plan balance.

 

Limited Scope Audit vs. Full Scope Audit

Because SAS 136 does not change ERISA, plan sponsors can still elect to have a limited scope audit (now known as the ERISA Section 103(a)(3)(C) audit) if the qualified institution holding the assets provides a certified statement confirming the accuracy and completeness of the plan’s investment information. (A “qualified institution” is a financial organization that holds plan assets and is regulated and subject to periodic examination by a state or federal agency.)

During a limited scope audit, the auditor is not required to test the accuracy or completeness of the investment information, nor does the auditor need to assess the control risk related to assets held by the certifying institution. But the auditor does need to provide required financial statement disclosures and review and test controls on plan operations related to the plan’s noninvestment information—such as participant data, contributions, and benefit payments.

Auditors must conduct a full scope audit if the institution does not provide a certified statement on the plan’s investment information, or on any investments not included in the certification. During a full scope audit, the auditor must review and test both the plan’s investment and noninvestment information.

 

What’s “New” About the New Auditing Standard?

SAS 136 clarifies and formalizes current best practices that auditors working with employee benefit plans should already be familiar with. It also provides detailed requirements unique to employee benefit plans, which will help auditors meet their obligations. Some of the most significant provisions found in SAS 136 are described below.

  • SAS 136 replaces a modified opinion (typically a disclaimer) used with ERISA Section 103(a)(3)(C) audits with a two-pronged opinion. The opinion should indicate whether the
    • information in the financial statements not covered by certification is presented fairly, and
    • investment information contained in the financial statements reconciles with, or is derived from, the information contained in the certification.
  • The auditor must obtain plan sponsor acknowledgements that the sponsor is responsible for
    • determining whether a 103(a)(3)(C) audit is permissible and whether the certification meets ERISA requirements,
    • maintaining and providing a current plan document,
    • preparing and fairly presenting financial statements, and
    • providing a substantially completed (draft) Form 5500.
  • The auditor must read the current plan document and consider relevant plan provisions when designing and performing audit procedures.
  • The auditor must identify which investment information is certified.
  • SAS 136 requires the auditor to follow detailed requirements for providing written communication to the plan sponsor about the results of the audit.
  • SAS 136 reformats and changes certain content requirements within the auditor’s report.

 

Why Did the AICPA Create a Formal Auditing Standard?

The DOL grew concerned about the quality of ERISA plan audits after it conducted an assessment of Form 5500 filings and related audit reports for the 2011 filing year. The purpose of the DOL’s assessment was to determine whether the quality of ERISA plan audits had improved since the DOL last reviewed Form 5500 filings in 2004. The DOL found that ERISA plan audits had not improved since 2004. In fact, the audits had grown worse.

During the assessment, the DOL reviewed a sample of 400 plan audits from a pool of 81,162 Form 5500 filings. The DOL found that 39% of audits contained major deficiencies with respect to one or more generally accepted auditing requirements. These deficiencies could lead to the rejection of the Form 5500 filing and put $653 billion in assets for over 22 million plan participants at risk. (In 2004, 33% of audits contained major deficiencies.) Examples of major deficiencies included no documentation of an internal control environment, failure to test timely remittance of employee contributions, inadequate work determining eligibility and calculation of benefit payments, and no testing of participant investment options.

The DOL also reviewed the number of limited scope audits that were performed. In 2004, 59% of the 400 audits reviewed were limited scope audits. In 2011, that number increased to 81%. The DOL believes that the increased number of limited scope audits has contributed to the increased number of deficiencies found in audits.

 

How Should Plan Sponsors Prepare?

Although the SAS 136 provisions won’t take effect until 2021, plan sponsors should discuss the effect of these changes with their CPAs. While the new SAS 136 primarily affects audit practices, plan sponsors that have not taken an active role in past plan audits can anticipate more involvement under this newly formalized standard.

Ascensus will continue to monitor any developments regarding this guidance. Visit ascensus.com for future updates.

Click here for a printable version of this issue of the Retirement Spotlight.