Are you up to speed on the audit report standard changes for employee benefit plans? As discussed in an earlier blog, Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, became effective December 15, 2021. There are key responsibilities you need to consider.

What are the Plan Administrator’s responsibilities?

• Understand your responsibility for:
  • Maintaining the plan document and amendments
  • Maintaining appropriate records
  • Administering the plan and ascertaining if the plan financial statements are in accordance with the plan provisions
  • Ascertain whether an ERISA Section 103(a)(3)(C) audit is allowed, the certification meets the requirements in 29 CFR 2520.103-5 and the certified investment information is measured, presented and disclosed appropriately (more on this below)

As part of the audit acceptance procedures, you will need to agree in writing to the above as detailed in the audit engagement letter.

What about the investment certification?

Your auditor is required to ask how you determined that the certification was prepared and certified by a qualified institution.

How do you determine if the investment certification is acceptable?

• Is the certification issued by a qualified institution? Qualified institutions can be banks, insurance companies or similar institutions that are regulated by a federal or state agency. Broker dealers and investment companies are not qualified institutions unless a separate trust company meets the qualified institution requirements.
• Is the certification in writing and signed by an authorized representative?
• Did the qualified institution certify the accuracy and completeness of the investment information? Example language from a certifying institution is: The XYZ Bank (Insurance Carrier) hereby certifies that the foregoing statement furnished pursuant to 29 CFR 2520.103–5(c) is complete and accurate.
• Is there qualifying language in the certification or reporting package that certain investment information is not accurate or complete? The Plan Administrator should work with the institution to ensure the investment information is complete and accurate for electing an ERISA Section 103(a)(3)(C) audit.
• Is the certified investment information appropriately measured? Plan investments are generally presented at fair value and it is the Plan Administrator’s fiduciary duty to ascertain if they are appropriately measured.

Based on the above, conclude if the certification has met the requirements to elect an ERISA Section 103(a)(3)(C) audit. It is not required to document the responses to the above questions, however, we suggest you document the responses to share with your auditors and retain as evidence that you are meeting your Plan Administrator fiduciary responsibilities.