DOL Notices

[BG5150]

recently, we have received two types of notices from the DOL. One states: hey, no audit was attached. Amend the plan and get us the audit post haste or bad stuff will ahppen.

The other is a bit odder. It's "Tips for Selecting and Mnitoring a Plan Auditor" and starts off with:

I am sending you this email because you may be in the process of selecting or working with a CPA firm to audit the XYZ 401(k) Plan's 2015 financial satements that will be submitted to the DOL as part fo the Plan's Form 5500 filing.

The notice goes on to talk about the importance of getting an good audit and choosing a good auditor. It seems to be merely informational and no futher action or penalties will ensue.

The form was filed in early October and included the audited financials.

So, why did we get this? Is this something that maybe should have gone out in the summer but was sent out late?

Anyone else get these?

[BG5150]

Never mind. It mentions 2015, so I guess it's just a "trying to be helpful" type message.

/thread

[My 2 cents]

The DOL has become concerned (as I understand it) that plan sponsors are not exercising sufficient diligence in making sure they engage suitably competent auditors. It would not do for the auditors to overlook material errors or prohibited transactions!

[R. Butler]

I echo the comments by 2 cents. The DOL is targeting correspodnece to plan sponsors who usetilize auditors who perform less than 100 employee benefit plan audits per year. They really want to crack on auditors, particularly those with small practices.

They issued a report in 2014 entitled Assessing the Quality of Employee Benefit Plan Audits. (You can google it and find it easily.) The first 5-6 pages contain a nice summary of the DOLs conclusions and recommendations. Some of it is a little unsettling because they are specifically targeting auditors with smaller practices. That is what they are going to do to tpa firms when the preparer information is required on the 5500's. A little surprising I haven't heard more concern about that.

[BG5150]

That is what they are going to do to tpa firms when the preparer information is required on the 5500's. A little surprising I haven't heard more concern about that.

Where did you find that out about TPAs?

[My 2 cents]

I may be wrong, but I think that R. Butler was speculating that after the DOL goes after small-practice accountants they will next go after small-practice TPAs. I don't think that the DOL has a plan to try to push plan sponsors over to larger-practice TPA firms, but I don't have any direct knowledge to the contrary either. The DOL targeting smaller accounting firms (based presumably on the assumption that the knowledge and diligence there will be less than one is going to find at larger accounting firms) does sound somewhat elitist (for want of a better word). Let us hope that they find the small firm practices up to DOL standards (and that if the DOL were to apply similar scrutiny to the work product of the larger firms, they would not be disappointed).

[BG5150]

If you look through the report Butler mentioned, it says that the lower number of audits a firm does each year directly correlates to a higher number of deficient audits. And in the report, ti says one of the DOL action items will be to:

Revise case targeting to focus on:
a. CPA firms with smaller employee benefit plan audit practices that audit plans with
large amounts of plan assets, and

b. CPA firms in the 25-99 plan audit stratum given their high deficiency rates and the
amount of plan assets ($317.1 billion) and plan participants (9.3 million) at risk from
deficient audits.

The DOL also wants to revise ERISA to:

1) Allow for penatlies for late filing against the audit firm if the deficient audit casues the filing to be rejected.

2) Repeal the limited scope audit exemption, but allow the DOL to define when a LSA would be acceptable.

[Bird]

Wow, thanks R. Butler for posting about that study. "Unsettling" just begins to describe my thoughts. I understand the part about TPAs is speculation but it seems like a reasonable conclusion.

[Calavera]

http://www.asppa.org/News/Browse-Topics/Details/ArticleID/5554/DOL-Initiative-on-Missing-Plan-Audit-Reports