NTSAA & ASPPA Renew Appeal for 403(b) Plan Audit Relief

Melinda | February 17, 2011 | 0 Comments

Transitional Relief Needed for 403(b) Plan Form 5500 Filings

ARLINGTON, VA, (February 17, 2011) –The following is a statement from Craig P. Hoffman, General Counsel and Director of Regulatory Affairs of The American Society of Pension Professionals & Actuaries (ASPPA) requesting additional transitional relief for 403(b) plans required to file the revised Form 5500 series. Read the comment letter filed with the U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) here.

“ASPPA and the National Tax Sheltered Accounts Association (NTSAA), a division within ASPPA made up of 403(b) plan professionals; renew their appeal to the DOL (see October 8, 2010 letter) for additional transitional relief for 403(b) plan sponsors struggling to meet the new compliance requirements of Form 5500s. For the first time since ERISA was enacted, certain 403(b) plans were required last year to file an independent audit report with their Form 5500. Because of the way 403(b) plan contributions are invested, plan sponsors had and will continue to have significant difficulties with the financial statement requirements. Sponsors are doing their best to meet the new DOL mandates but are struggling and facing staggering expenses which they cannot afford.

ASPPA and NTSAA members report that the required audit costs are sky-rocketing (often $50,000 - $100,000 per plan) and the plan sponsors simple don’t have the money to cover expenses of this magnitude. The 403(b) plans affected are offered by tax-exempt charitable organizations, which were hit hard by the economic downturn. Efforts to avoid layouts and continue benefits have exhausted most personnel budgets—despite a strong desire to offer a tax qualified retirement savings program.

Often 403(b) plans are required to have costly full scope audits because of an auditors’ lack of familiarity with a 403(b) plan or because some vendors are unable to offer the limited scope certification needed to avoid a full scope audit. Plan fiduciaries often cannot resolve these problems because they do not have the authority to direct participants to transfer the funds to another provider or surrender the contract. In effect, the plan is stuck with the contract unless the participant takes action.

NTSAA and ASPPA offer the following recommendations for transitional relief:

  1. Opening Balance Relief: Accept the financial statements of the employer based on the documented good faith effort and only require an auditor’s opinion for financial activity for the current year, assuming a correct opening balance. This would be consistent with similar transitional relief that was provided when ERISA was first enacted.
  2. Disclaimed Audit Relief: Issue a rule to ensure the audit will provide useful information to fiduciaries, the DOL, and participants while substantially reducing expenses. If an auditor is unable to issue an opinion because of the limited scope exemption, or where a limited scope cannot be formed because of the lack of a vendor certification, we suggest the auditor opine on the business controls of the plan sponsor or other financial matters of the plan.
  3. Develop 403(b) Plan Auditing Guidelines: Form a committee of industry experts to suggest, review, and modify existing audit guidelines.

We believe the transitional problems faced by 403(b) plan sponsors in complying with the new reporting rules are every bit as daunting as those present when ERISA was enacted. We urge the DOL to review our recommendations and provide additional transition relief.”

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About NTSAA:
  The National Tax Sheltered Accounts Association (NTSAA) is the only independent, non-profit association dedicated to the 403(b) and 457 marketplaces in the nation and represents practitioners, agencies, corporate, and employer members. The NTSAA mission is to provide members with high quality education, technical support, and information resources, as well as to offer a professional networking forum. For more information, visit www.ntsaa.org.


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