Government Affairs
In July 2019, the Accounting Standards Board issued SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (SAS 136). SAS 136 reflects a new reporting model for ERISA audits.
One of the most significant changes of the Statement of SAS 136 was the renaming of the limited scope audit. Under the new guidance, investments certified by entities (e.g., insurance companies, banks, trust companies or similar regulated institutions which hold plan assets in a trust) under 29 CFR 2520.103-5(b) are renamed ERISA Section 103(a)(3)(C) audits. The original effective date was for periods ending on or after Dec. 15, 2020 and subsequently delayed to periods ending on or after Dec. 15, 2021. Auditors can choose to adopt the standard early.
Due to the anticipated change, the 2020 Form 5500 Schedule H Accountant’s Opinion section was changed to reflect the new standard. The delay has created a mismatch between the Accountant’s Opinion section in Part III of the Schedule H and the delayed effective date of the new audit standard if the standard is not adopted early.
The schedule H line 3b replaces the simple yes/no options related to the limited scope audit with the following:
b Check the appropriate box(es) to indicate whether the IQPA performed an ERISA section 103(a)(3)(C) audit. Check both boxes (1) and (2) if the audit was performed pursuant to both 29 CFR 2520.103-8 and 29 CFR 2520.103-12(d). Check box (3) if pursuant to neither.
(1) DOL Regulation 2520.103-8 (2) DOL Regulation 2520.103-12(d) (3) neither DOL Regulation 2520.103-8 nor DOL Regulation 2520.103-12(d).
DOL Regulation 2520.103-8—An IQPA audit does not need to extend to certain financial statements if the information is prepared and certified by a bank or similar institution or an insurance company that is regulated, supervised and subject to periodic examination.
DOL Regulation 2520.103-12(d)—An IQPA audit of an employee benefit plan does not need extend to the investments in a pooled investment fund that files a separate audited Form 5500 as a 103-12 IE.
If the auditor is an early adopter of the new standard, the 2020 Schedule H works. But if the auditor is not an early adopter of the new standard, how must the question be answered?
The answer is, there is no answer yet. At a February IRS Mid-Atlantic Liaison meeting, representatives from the DOL indicated an answer would be coming. However, we understand that recent discussions with the AICPA to mark unmodified even if SAS 136 has not been adopted early have not been met with enthusiasm.
It will be interesting to see how this turns out! Stay tuned.
Mary Andersen, ERISAdiagnostics, Inc. and Kristina Kananen, Hunter Benefits Consulting Group, Inc., are members of the ASPPA Reporting and Disclosure Subcommittee.
Opinions expressed are those of the authors, and do not necessarily reflect the views of ASPPA or its members.
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