DOL Inspector General Audits EBSA

The Department of Labor’s Inspector General is looking at how the department’s Employee Benefits Security Administration monitors plans that claim the “small plan” exemption from the annual independent audit requirement that applies under ERISA, the ASPPA Government Affairs Committee has learned. 

Normally, retirement plans need to engage an independent CPA to audit and certify the plan’s financial records each year. Small plans (generally plans with fewer than 100 participants) are exempt from the audit requirement if:
• at least 95% of the plan’s assets are “qualifying assets” or the plan’s fidelity bonding amount is at least equal to the value of non-qualifying assets
• the plan’s Summary Annual Report includes additional information about the names of the financial institutions holding plan assets and the surety company issuing the fidelity bond, as well as wording that notifies participants about their rights to copies of financial institution plan records and recourse to the DOL regional office for noncompliance
• on request, copies of the surety bond and/or financial statements are provided to participants without charge

According to the Inspector General’s 2014 “workplan,” the goal of the new project  is “to determine if EBSA is providing sufficient guidance and oversight of unaudited small plans, particularly with respect to financial disclosures and qualified investments.” As part of this initiative, the Inspector General recently began sending out letters to sponsors of small plans who claimed an audit waiver, requesting:
• a copy of [the] plan’s Summary Annual Report showing all qualifying investments and regulated financial institution certification(s) for the plan’s investments, trust statements and associated detailed asset schedules; and
• documentation used to calculate the number of participants at the beginning and end of the year on forms 5500-SF.

The Inspector General will use the results to prepare a report on how well the EBSA is doing at monitoring the small plan audit exemption. One might expect the DOL itself to begin looking more closely at this issue through its own enforcement activities. In light of this increased scrutiny, it is important to remember that having fewer than 100 participants is just one of several conditions that must be satisfied to qualify for the small plan audit waiver.  

Craig Hoffman is ASPPA's General Counsel and Director of Regulatory Affairs.