Art of the Qualified Plan Audit

In Summary Conflict Exists in Reporting Standards: Discrepancies arise because auditors must adhere to their financial reporting framework (GAAP/FinREC), which often clashes with the cash basis accounting required by the DOL/IRS 5500 instructions, particularly concerning the netting of corrective contributions versus reporting them as a cash-basis expense on line 2f. Auditors and TPAs Must Follow … Continued

In Summary Auditor Selection Responsibility: Plan sponsors must evaluate the qualifications of the CPA firm hired for a retirement plan audit, a challenging task given the complexity of the work. The Department of Labor (DOL) and AICPA provide resources to assist in this selection, emphasizing that the size of an audit practice and its commitment … Continued

  Maria Hurd, CPA, RPA, Christopher Ciminera, CPA, QKA,  and many members of our employee benefit plan audit team are highly sought after for speaking events. Here are a few upcoming speaking events that we thought you might be interested in attending. APRIL 19, 2021: Death, Taxes, and Retirement Plan Operational Failures – On April … Continued

In Summary Certified Value Might Not Be Valid When Limited Scope Certification Is: An ERISA Section 103(a)(3)(C) certification guarantees completeness and accuracy based on a financial institution’s ordinary business records, but this does not assure compliance with GAAP. If the custodian’s “best available information” is not fair value, a certified value is provided that auditors … Continued

Posted By: Chris Ciminera, CPA, QKA A major benefit to employees who are participating in a qualified retirement plan is the deferral of taxes. Pre-tax deferrals, employer contributions, and the related earnings grow tax-free until the amounts are distributed from the plan. Unfortunately, when a participant takes a distribution upon retirement or an early distribution … Continued

Posted By Maria T. Hurd, CPA How Big Can a Retirement Plan Be and Still Qualify for the Small Plan Audit Exemption? “Define Large.” It is a question I often get from advisors hoping to get their clients out of a retirement plan audit. Until now the answer has been simple: 100 participants is the … Continued

In Summary How to Prevent Participants and Beneficiaries from Becoming Missing: Maintain accurate, current census information by regularly requesting updates through plan communications like the Summary Plan Description, and during the enrollment and exit processes. Ensure communications are clear, prominently state their purpose, and actively follow up on undeliverable mail, emails, or uncashed checks. Implement … Continued

In Summary Correction Options Exist Even if Funds Are Gone: Overpayments, which often represent a timing difference, can be corrected through the Employee Plan Compliance Resolution System (EPCRS). When a participant cannot return the money, viable alternatives include amending the 1099-R to remove favorable tax treatment, making a “make-whole” contribution to defined benefit or balance-forward … Continued

In Summary Hardship Distribution Substantiation Options: The plan may require backup documentation for the hardship reason and amount, or allow the participant to self-certify the hardship reason, amount, and financial necessity in writing. Self-certification requires the employer to provide specific written notifications regarding taxability and rules, and the participant must maintain the backup. Preventing Ineligible … Continued

In Summary GAAP and ERISA Require Disclosures for Certain Transactions: Related Party transactions that are material to the financial statements must be disclosed in the notes, providing details like the relationship, transaction description, and dollar amounts (FASB ASC 850). Separately, all transactions with the broader group of Parties-in-Interest must be disclosed unless a statutory or … Continued