If your company’s employee benefit plan (EBP) is required to have an annual audit performed under ERISA, particularly if you have a limited scope audit, please note that your audit will undergo some changes effective for periods ending on or after December 15, 2021. One such change will be that the limited scope audit will no longer be available.  Instead, what used to be a limited scope audit will now be an ERISA Section 103(a)(3)(C) audit with new requirements. Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, (SAS No. 136, as amended), will implement new performance requirements as well as changes to the Auditors’ Report that will affect both plan management and auditors alike.

If you are a plan administrator, how does this affect you?  Once these new changes go into effect, they could impact you in a number of ways. For starters, your auditor may request that you acknowledge your responsibility for the following in an engagement letter:

  • You maintain a current plan instrument, including amendments,
  • You administer the plan, and
  • You will provide the auditor with a substantially complete Form 5500 prior to the dating of the financial statements.

Additionally, you may be asked for more information than in prior years that the auditor will need to perform the audit under the new standard, resulting in more time necessary to prepare for your audit.

As mentioned above, if your company typically requests a “limited scope audit” for its employee benefit plan, there are new performance and reporting requirements for you. The limited scope audit will now be referred to as an ERISA Section 103(a)(3)(C) audit and is not considered a scope limitation.

First, plan administrators requesting an ERISA Section 103(a)(3)(C) audit will be required to determine:

  • Whether an ERISA Section 103(a)(3)(C) audit is permissible,
  • Whether the investment information is prepared and certified by a qualified institution,
  • Whether the certification meets DOL requirements,
  • Whether the certified investment information is appropriately measured, presented and disclosed in accordance with the applicable financial reporting framework.

One item to pay particular attention to is the certification from the qualified institution. The financial institution, bank, etc., must be regulated by a federal or state agency and the person signing the certification must be authorized to sign for the institution.  Lastly, the certification must state that the investment information is complete and accurate before authorizing an ERISA Section 103(a)(3)(C) audit. Any investment items not falling under the certification will be subject to audit testing procedures.

As you begin preparing for your EBP audit this year, please keep in mind that these additional requirements and changes may require more time. While we have not covered the Statement in its entirety, you can contact your BMSS professional for more information about how this may affect you and how you can prepare for these changes.  Visit bmss.com or call our office at (833) CPA-BMSS.

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