Jump to content

Plan sponsor is also the custodian. Is the plan required to be audited?


Trisports
 Share

Recommended Posts

Our client (ABC bank) is sponsoring a pension plan with 85 participants.  ABC bank also holds the investments and some of the assets are invested in the ABC money market fund.

The auditor stated that because the ABC bank holds the investments (they are the trustee and custodian), the plan is required to be audited.  More than 95% of the assets are qualified assets and there are less than 100 participants so we think the audit waiver requirements are met.

The fact that the plan sponsor is also the custodian might be a potential fiduciary issue (prudent rule) but that should not preclude the plan sponsor from waiving the audit requirement.

Do you agree or is the client required to have an audit? 

 

Link to comment
Share on other sites

  • Trisports changed the title to Plan sponsor is also the custodian. Is the plan required to be audited?

I agree with you. In fact, if the bank is also Trustee, certain otherwise non-qualifying assets could be considered "held by" a regulated financial institution and you can still avoid the audit requirement. Haven't seen anything like this in a long time, but as I recall, it could apply to art, or limited partnerships, for example, but not to safe deposit box items. But I'd want to look into that aspect - it's been a long time, so don't take my word for it...

Link to comment
Share on other sites

Here’s the rule:  https://ecfr.federalregister.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104-46.

Unless there is a reason other than that rule to audit the retirement plan’s financial statements, might the plan’s administrator revisit the prudence of its selection of the independent qualified public accountant?

If not, the plan’s administrator might face a practical task of persuading the audit firm.  Often, some evidence that the plan’s administrator considered a lawyer’s advice closes a point of this kind.

Even if both the plan and its administrator lack its own counsel, a bank typically has counsel readily available.  For example, Federal law requires a national bank that acts in a fiduciary capacity (in its business, rather than regarding employee-benefits plans for the bank’s employees) to retain “legal counsel who is readily available to advise the bank and its fiduciary officers and employees on fiduciary matters[.]”  See 12 C.F.R. § 9.5(d).  Some States have similar law.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...