Are Plan Sponsors ready to tell their 401(k) plan auditor whether the conditions for electing an ERISA Section 103(a)(3)(C) audit have been met? Let PriceKubecka, PLLC explain this new change.
In July 2019, the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board (ASB) issued SAS No. 136, which prescribes new performance requirements for ERISA plan financial statement audits and changes the form and content of the auditor's report. The changes are meant to enhance the quality of employee benefit plan audits.
With the SAS No. 136 guidance, a limited scope audit will no longer be referred to as such but will be known as an "ERISA section 103(a)(3)(C) audit. Tomayto, tomahto? SAS 136 Limited scope audits are generally the preferred audit approach for 401(k) plan sponsors. A limited scope audit means the auditor does not audit the investment information that a qualified institution prepares and certifies. The auditor may rely on the accuracy of the investment information.
This usually reduces the cost and time involved in an audit.
What will plan sponsors need to do differently?
Starting with the 401)k) plan audit report and financial statements for periods ending on or after December 15, 2021, plan sponsors will need to direct the auditor on whether the plan's investment information is sufficient and can be relied upon without the need for the institution's statements to be audited in detail. Plan sponsors will be required to:
- Determine whether the auditor can perform an ERISA Section 103(a)(3)(C) audit,
- Confirm that the bank's (trust company's or insurance company's) certification of the investment statements meets the DOL rules, the investment information is appropriately measured, presented, and disclosed in accordance with the applicable financial reporting framework, so that it may be compared to information in the plan's financial statements.
At PriceKubecka, PLLC, we can assist you with the requirements. For a calendar year 401(k) plan, this change applies to the 2021 Plan Year Audit Report and financial statements. Early adoption is permitted. We are actively working with our clients, their trusted advisors, and their financial institutions to help them understand the new guidance so they feel confident in the quality and accuracy of their 401(k) plan's audit.
Let us help you navigate this change with confidence!
