Employee Benefit Plans Accounting, Auditing and Regulatory Update By: Lawrence PetersCPA, EA, AIF® 2012.12.12

Representatives from the Internal Revenue Service and the Department of Labor made presentations at the Employee Benefit Plans Accounting, Auditing and Regulatory Update sponsored by the AICPA in Washington, D.C. on December 6 and 7, 2012. They emphasized that the goal of the recent ERISA 408(b)(2) legislation was to improve transparency of fees for plan participants and plan sponsors.

The responsibility of service providers to plans were specified in ERISA 408(b)(2), and established comprehensive disclosures from service providers concerning fees, services and potential conflicts of interest. These rules were effective 7/1/2012.

Fee and expense disclosures to participants are governed by ERISA 404 and were effective for disclosure of “plan level” information 8/30/2012 with disclosure required in quarterly participant statements beginning 11/14/2012.  Information regarding plan fees and expenses deducted from accounts, information about available investments, and standardized disclosures of expense and return are required.

Fees and expenses paid are required to be disclosed in the Form 5500. Information about these fees is in the financial summary, reported in Schedule C, and further disclosed in the IQPA (Independent Qualified Public Accountant) report that must also be attached.

The key point stressed by the government officials to the accountants present was that failure to comply with the disclosure rules, and the requirement that the fees paid be reasonable, would result in the payment of the fees to be considered a prohibited transaction between the plan and a party in interest. Further, the DOL expects the auditors to identify and require that any failure be reported in the Form 5500 Schedule G.

So, be on the alert and be sure your disclosure is complete and that you have evaluated the reasonableness of fees. If not, you may find that your auditor is compelled to report the prohibited transaction.

Lawrence R. Peters

Larry is a Senior Consultant at Westminster Consulting, LLC and is based in Princeton, NJ, Larry leads the Firm’s defined benefit practice. His experience includes plan design and funding, mergers and acquisitions, executive benefits and vendor benchmarking, among others.

Prior to joining Westminster...

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