Bonding/Reporting Requirements - SAR - for small plans

[Cathy from Chicago]

I can't find a quick reference to the changes the DOL made for plan years beginning after April 18, 2001 on bonding, etc. so as to avoid an independent qualified audit. Could someone take a moment and either explain them or refer me to a site? Thanks, in advance.

[Guest lisbetf]

ENHANCED ANNUAL DISCLOSURE REQUIREMENTS

The new regulations require more disclosure in the summary annual report (SAR) for a plan that does not want to engage acertified public accountant (CPA) to perform the independent audit of the plan. The SAR would be required to include

1. The name of each institution holding qualifying plan assets and the amount of assets held by each institution as of the end of the plan year;

2. The name of the surety company issuing the bond if more than 5 percent of a plan’s assets are nonqualifying plan assets;

3. A notice indicating that participants and beneficiaries may, on request and without charge, examine or receive copies of evidence of the required bond and copies of statements received from each institution holding qualifying assets that describe the assets held by the institution as of the end of the year; and

4. A notice stating that participants and beneficiaries should contact the regional office of the PWBA if they are unable to examine or obtain copies of the statements received from each institution holding qualifying assets or evidence of the required bond, if applicable.

Bond Requirement

If less than 95 percent of the plan’s assets are qualifying plan assets, any person handling plan assets must be bonded in accordance with the prior regulations’ fidelity bond requirements, but in an amount that is at least equal to the value of the nonqualifying plan assets. This requirement increases the fidelity bond requirement of the prior regulations, which mandated a bond of 10 percent of plan assets.

Qualifying Plan Assets

The term qualifying plan assets means:

1. Qualifying employer securities;

2. Loans that satisfy the prohibited transaction exemptions;

3. Shares issued by an investment company registered under the Investment Company Act of 1940;

4. In the case of an individual account plan, any assets in the individual account of a participant over which the participant has the opportunity to exercise control if the participant is furnished, at least annually, a statement from a regulated financial institution describing the assets held (or issued) by such institution and the amount of such assets; and assets held by any of the following institutions:

A bank or similar financial institution

An insurance company qualified to do business under the laws of a state

An organization registered as a broker-dealer under the Securities Exchange Act of 1934

Any other organization authorized to act as a trustee for individual retirement accounts