allocated contracts

[Guest twalters]

In the prior year, the sole assets of a defined contribution plan were allocated insurance/annuity contracts. Therefore, there was no audit requirement and the contracts were only reported on Schedule A of the 5500.

In the current year, the plan has both allocated and unallocated contracts and an audit will be required. The allocated contracts will still be excluded from the plan financial statements and only be reported on the Schedule A.

Does this change the testing of participant data? Since the allocated insurance contracts are excluded from the plan's financial statements, they will not be covered by the auditor's report. Do I need to perform any testing on the individual participant's holding these allocated insurance/annuity contracts?

Also, is the fact that the plan allows these investments usually footnoted and, if so, with or without amounts?

Please provide any references/sources that you have found on this subject.