ERISA Plan Audits: Big Change for 2021 Plans

If your business has previously been subject to an ERISA plan limited scope audit, you should know that effective for your December 2021 plan audit, the limited scope audit has been replaced by the ERISA Section 103(a)(3)(C) audit. While the name may be more complex, the changes are a bit easier to understand. The change in ERISA created a new Statement on Auditing Standards 136 (SAS 136), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.

SAS 136 prescribes certain new performance requirements for ERISA plan financial statement audits and changes the form and content of the related auditors’ report. At the same time, some of your responsibilities related to the plan audit remain unchanged. Read below for answers to common questions.

What does this change mean to you?

An ERISA Section 103(a)(3)(C) audit may be elected by management only when a qualified institution certifies both the accuracy and completeness of the investment information (investments and investment transactions such as interest, dividends, gains and losses).

What is a qualified institution?

The type of entity that can issue a certification is a bank or similar institution, or insurance carrier. Certain entities that are like a bank, such as a trust company, can also issue a certification.

What are your additional responsibilities when electing an ERISA Section 103(a)(3)(C) audit?

You continue to be responsible for determining whether the plan’s financial statements and disclosures are prepared in accordance with the applicable financial reporting framework and in conformity with the DOL Rules and Regulations for Reporting and Disclosure under ERISA.

You are also still responsible for maintaining a current plan instrument, including all plan amendments, administering the plan, and determining that the plan’s transactions that are presented and disclosed in the financial statements are in conformity with the plan’s provisions, including maintaining sufficient records with respect to each of the participants, to determine the benefits due or which may become due to such participants.

What responsibilities does the ERISA audit firm have over the certified information?

Our ERISA audit team will evaluate your assessment of the permissibility of the election, including your assessment of the qualifications of the institution preparing and certifying the investment information.

We will obtain and read a copy of the certification you receive, compare the certified investment information with the related information presented and disclosed in the financial statements, and read the disclosures relating to the certified investment information to assess whether they are in accordance with the presentation and disclosure requirements of the applicable financial reporting framework.

As part of our acceptance of the audit engagement, we will request plan management to acknowledge in the engagement letter management’s responsibilities for the aforementioned requirements.

We believe it is important that you have ample information to make good decisions for your plan. If you are unsure if the certification institution is qualified under ERISA rules or if you have questions about your responsibilities, please complete the Contact an Advisor form below or call us at 404-874-6244.