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403(b) Plan - Form 5500 Audit Requirement


Guest Robert Lees

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Guest Robert Lees

Is an ERISA 403(B) Plan with over 100 participants required to file an independent qualified public accountant's opinion? I know plans that provide benefits exclusively through allocated insurance contracts or policies that fully guarantee the payment of benefits, but if the 403(B) Plan is not funded through these means are they required to have an audit?

thanks.

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Under current interpretations, the answer is that no audit is required, nor is the financial information for the plan required to be disclosed in the Form 5500 filing. The only source for this statement is the filing instructions to the Form 5500 series. This is particularly apparent when you look at the upcoming 1999 series. 403(B) plans without regard to funding source are required to complete the lead schedule (Form 5500) only.

Though this is policy by filing instruction only, I am not aware of any activity on the part of the DOL to change this policy.

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Technically, the plan is required to be audited per the regulations, but there is no requirement to submit the audit report to the governement (per the Form 5500 instructions). As a practical matter, audits of 403(B) plans are very rare.

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  • 2 weeks later...

I must respectfully disagree with IRC401. If you look at ERISA Reg. 2520.103-1(B)(1) regarding the contents of the annual report, it says to file the Form 5500 and any required schedules or attachments. The regulation specifically incorporates the filing instructions of the Form 5500 into the terms of the regulation for purposes of defining what portions of the Form 5500 are required to be included in the filing.

This guidance is provided in accordance with ERISA Section 110 which grants the Secretary the authority to prescribe alternative methods for satisfying the general reporting and disclosure rules for any pension plan, class of plans, etc. The statutory provision specifies that such alternative may be prescribed by regulation "or otherwise."

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Good points, Becky.

IRC401...If 403(B) audits are rare, I guess the IRS isn't doing much and all this action, audit guidelines, examiner training and extensive Voluntary Compliance and Correction activity is all "hype".

There is a lot of IRS audit activity out there, and a lot of it is apparently caused by this under reading of the 5500 instructions and deficient filing.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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  • 7 months later...

I was looking again at the issue of whether a 403(B) plan requires an audit because the 403(B) Answer Book gives an ambigious resolution to this issue. Sorry to reactivate a stale thread, but in case anyone else searches these boards to look up answers to old questions, I thought I'd add something.

Besides agreeing with Becky Miller's reasoning that an audit is not required, I've got this to add.

In a DOL/PWBA Information Letter dated November 15, 1996, reprinted in CCH Pension Plan Guide at paragraph 19,978H, the DOL clarified that even if a 403(B) plan is subject to ERISA and therefore must file a Form 5500, the plan administrator is not required to engage an independent qualified public accountant nor does the accountant's opinion need to be attached to the Form 5500.

The information letter based its interpretation on the instructions to the 1995 Form 5500, but noted that the instructions have been consistent since the 1975 Form 5500. Hence, the DOL's conclusion appears to apply to all years since ERISA. None of the Form 5500 instructions since the DOL information letter change this conclusion.

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