Defined contribution

Accounting Standards Group Issues Guidance for Those Conducting ERISA Retirement Plan Audits

The American Institute of Certified Public Accountants (AICPA) has issued a document entitled Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. The guidance is intended to assist those who conduct audits of financial statements that are part of ERISA-governed retirement plan reporting on Form 5500, Annual Return/Report of Employee Benefit Plan.

An independent financial statement audit requirement applies to an ERISA-governed retirement plan of an employer with 100 or more eligible employees, whether they are contributing to the plan, or not.

The guidance contained in this document is to be implemented for audits of ERISA plan financial statements for periods ending on or after December 15, 2020. The document “addresses the auditor’s responsibility to form an opinion and report on the audit of financial statements of employee benefit plans subject to … ERISA.”  It notes further that the guidance “addresses the significant public interest associated with audits of employee benefit plans subject to ERISA, and was undertaken in consultation with the U.S. Department of Labor.”


SEC Investment Guidance Appears in Today’s Federal Register, Triggering Effective Dates

Today’s Federal Register contains the Securities and Exchange Commission (SEC) final regulations and accompanying guidance for broker-dealers and advisers who provide certain investment services to retail clients. (See Ascensus’ Washington Pulse for more detailed information.) This official publication triggers effective dates contained in the guidance.

The guidance package was released by the SEC on June 5, 2019, and consists of the following items.

  • Regulation Best Interest, which establishes a standard of conduct for broker-dealers when making recommendations to retail customers
  • A new requirement for investment advisers and broker-dealers to provide a client relationship summary (Form CRS) to retail investors
  • An interpretation of the standard of conduct for investment advisers
  • An interpretation of the “solely incidental” prong of the Investment Advisers Act of 1940 that applies to broker-dealers

The guidance package has multiple effective and compliance dates.

Regulation Best Interest and requirements for use of Form CRS become effective 60 days from today’s publication in the Federal Register: September 10, 2019. There is a transition period until June 30, 2020, to give firms sufficient time to achieve full compliance.

The interpretations under the Advisers Act are effective as of today’s publication in the Federal Register.

Text of the Federal Register guidance is below.

SEC Regulation Best Interest

Form CRS Relationship Summary

SEC Interpretation Regarding Standard of Conduct

SEC Interpretation Regarding “Solely Incidental”


IRS Issues Proposed Regulations for Multiple Employer Plans

Today’s edition of the Federal Register contains the official version of new IRS proposed regulations on multiple employer plans (MEPs). Under such arrangements several employers elect to participate in a common plan. Objectives of these arrangements can include sharing of administrative burden and cost, and centralizing certain plan operation functions.

The new proposed guidance would revise 1979 IRS final regulations on MEPs. One key revision being proposed would address 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 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.

Public comments may be submitted for a 90-day period that will end October 1, 2019.

House-Passed Financial Services Bill Would Block SEC Investment Guidance

The U.S. House of Representatives this week approved legislation to provide appropriations for funding various financial services provided by federal agencies. Added to the bill before its passage was an amendment by House Financial Services Committee Chair Maxine Waters (D-CA) that would block federal funding for administration and enforcement of guidance recently issued by the Securities and Exchange Commission (SEC). The vote was largely along party lines in the Democrat-controlled House.

Targeted by this amendment was the SEC’s recently finalized Regulation Best Interest and accompanying guidance, which provide standards of conduct for broker-dealers in making investment recommendations to retail customers. Elements of the guidance also impact registered investment advisors. In addition to retail investment accounts, the SEC guidance also applies to investment recommendations made for an individual’s own account in an employer-sponsored retirement plan, or an IRA, health savings account (HSA), Archer medical savings account (MSA), IRC Sec. 529 plan, or Coverdell education savings account (ESA).

Rep. Waters and others have criticized the SEC guidance as allegedly being insufficient to protect investor interests. This guidance generally is considered less restrictive than Department of Labor fiduciary investment advice guidance that was vacated by an appeals court in June of 2018.

Because appropriations bills must be identical in House and Senate versions, and there is a Republican majority in the Senate, many feel that de-funding the SEC investment guidance is unlikely to ultimately occur. The Senate has not yet taken up financial services appropriations.