Did the DOL Just Change Audit Requirement?

[austin3515]

https://public-inspection.federalregister.gov/2023-02653.pdf

After considering the public comments, the Agencies decided to adopt the proposed counting method change for defined contribution individual account plans by adding a new line item on both the Form 5500 and Form 5500-SF for defined contribution pension plans to report participants with account balances at the beginning of the plan year (there already is a line item for reporting the number of participants with account balances at the end of the plan year). Instead of using all those eligible to participate, defined contribution plan filers will look at the number of participants/beneficiaries with account balances as of the beginning of the plan year (the first plan year would use an end- of- year measure) when determining if they are eligible for small plan reporting options, e.g., the Form 5500-SF. Conforming changes are also made to the short plan year filings and the “80-120” Participant Rule instructions to reflect this new counting method. See Appendix C for details on changes to forms and instructions related to this audit related participant counting method change.

 

[RatherBeGolfing]

Indeed they did!

ARA GAC was one of the stakeholders pushing this after LTPT in S 1.0, so I count this as a big win for our advocacy folks.  Its not always instant results, but this is big one.  We have plenty of plans that will drop out of audit because of it.

[Peter Gulia]

The rulemaking’s explanation states:

“Both Form 5500 and 5500–SF and their instructions are being revised to reflect a change in the reporting methodology related to the number of participants used in the current threshold ([that is], less than 100 participants) for determining when a defined contribution pension plan may file as a small plan. This change in methodology also includes eligibility for the waiver of the requirement for small plans to have an audit and include the report of an independent qualified public accountant (IQPA) with their annual report.” Page 12002 middle column.

And pages 12002-12003 explain that a point about long-term part-time workers helped persuade the Labor and Treasury departments to adopt the with-a-balance count.

The Labor department conservatively estimated the expense savings as $146 million.

https://www.govinfo.gov/content/pkg/FR-2023-02-24/pdf/2023-02653.pdf

[austin3515]

Wow, the auditors are gonna be ripped.  I agree this is is good for sponsors but the 25% of their employee benefit audit practice just disappeared.

[MoJo]

11 hours ago, austin3515 said:

Wow, the auditors are gonna be ripped.  I agree this is is good for sponsors but the 25% of their employee benefit audit practice just disappeared.

They already are.  Mass layoffs.  Auditors jumping out of windows (ground floor only - they are a conservative lot).  You know, all the stuff that proves this was a good idea!

Just kidding, of course (about mass layoffs, etc.)  Some of my good friends are (or should I say "were") plan auditors....

[austin3515]

Yeah me too.  A lot of them I know spent years building up and growing their practices.  Probably the ones they are not auditing anymore are the least profitable engagements but still, revenue is revenue.  If there was a parraellell to the TPA world I would be ripping mad.

[RatherBeGolfing]

39 minutes ago, austin3515 said:

Yeah me too.  A lot of them I know spent years building up and growing their practices.  Probably the ones they are not auditing anymore are the least profitable engagements but still, revenue is revenue.  If there was a parraellell to the TPA world I would be ripping mad.

This wasn't a total surprise.  This has been on the map since the proposed 5500 revisions in 2016. 

[austin3515]

Agreed, but from what I heard the AICPA was fighting this hard for obvious reasons.

[Belgarath]

Yeah, sort of like what we'd do if cross testing was eliminated as an option.

[RatherBeGolfing]

1 hour ago, austin3515 said:

Agreed, but from what I heard the AICPA was fighting this hard for obvious reasons.

Oh for sure.  I think there is a bit of a trade off with the audits themselves becoming more detailed (and more expensive), but probably not enough replace the income from the no-brainer audits of plans with 200 eligible but only 20 accounts balances.

I also wonder what impact the auto enroll mandate will have since we will surely see an increase number of participants with a balance.

[Coleboy1]

Is this effective for the 2023 plan year?

[austin3515]

First paragraph of the pdf in my link:

SUMMARY: This document contains final forms and instructions revisions for the Form 5500 Annual Return/Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan effective for plan years beginning on or after January 1, 2023.

[Gadgetfreak]

This is really a HUGE deal. Why isn't this garnering more attention? I have many clients with 100+ eligible employees and under 50 participants with balances. They are going to save a bundle!

[austin3515]

Its mindblowing that there is not more attention. I can't understand it. 

[Gadgetfreak]

People are still dizzy from Secure 2.0 :). 

[MoJo]

3 minutes ago, austin3515 said:

Its mindblowing that there is not more attention. I can't understand it. 

Understand wha ...SQUIRREL - LTPT.... oh yea - audit requir ...SQUIRREL -Roth employer contributions ... Yea,  I get it, money savin ...SQUIRREL - PLESA accounts...

Yea.  Not much else going on....

[RatherBeGolfing]

2 hours ago, austin3515 said:

Its mindblowing that there is not more attention. I can't understand it. 

Most people dont pay much attention to the release of next year's 5500 in the middle of testing season I guess?  ASPPA/ARA did mention it in one of the daily/weekly news emails though.

[RatherBeGolfing]

2 hours ago, MoJo said:

Understand wha ...SQUIRREL - LTPT.... oh yea - audit requir ...SQUIRREL -Roth employer contributions ... Yea,  I get it, money savin ...SQUIRREL - PLESA accounts...

Yea.  Not much else going on....

you are on fire today Sir!

[MoJo]

13 hours ago, RatherBeGolfing said:

you are on fire today Sir!

Yea, well, it's been one of those days/weeks/months/years/decades....  😃