CPA & Business Advisory Blog

Employee Benefit Plan Commentator – Spring 2011

This quarterly Employee Benefit Plan Commentator includes the following articles:

Recent EBP Developments

Change and transparency are signs of the times, especially for employee benefit plans. The past year has brought continued changes in fair value measurement disclosures related to all plans and in filing requirements for 403(b) plans.

There have also been changes relating to the disclosures of fees and compensation paid by the plan to allow for greater transparency to plan sponsors and participants. Change is inevitable, and it is even more important than ever for plan fiduciaries to stay in the know.

Investment Reporting and Disclosure – Be in the Know as you Prepare for your 2010 Plan Year Filings.

Fair valuation of investments continues to be an area of focus for regulators and standard-setters, and the theme of recent Public Company Accounting Oversight Board (PCAOB) communications and reports demonstrates an ongoing scrutiny of auditors in this area. The fair value standards continue to evolve and expand the disclosure requirements, at a pace that is creating very real challenges for those responsible for the preparation of plan financial statements and related footnote disclosures. As evidenced by the issuance of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2010-06, Improving Disclosures About Fair Value Measurements, the current FASB financial instruments project and other projects currently open under the FASB's Emerging Issues Task Force (EITF), fair value disclosure requirements will continue to expand.

Click here to read more about Investment Reporting and Disclosure.

403(b) Plans – How Many Are There?

As anticipated, the first required financial statement audits of large, ERISA-covered 403(b) retirement plans were fraught with challenges.

But, before the audit process even began, plan sponsors were faced with determining just how many plans they had and which, if any, were subject to the audit requirement. Unlike the environment for 401(k) type plans where plan assets generally are held by one trustee or custodian, 403(b) plans often purported to create a new plan each time a new vendor was added to the investment mix. As a result, plan sponsors needed to determine (often with legal counsel input) how many "plans" they sponsor, where the assets were held and how many were subject to audit.

Click here to read more about 403(b) plans.

DOL and Internal Revenue Service (IRS) Annual Filings

There are no changes of note in the 2010 Form 5500, but there are some items that plan sponsors may want to keep in mind as the filing season approaches.

Common Filing Problems

One of the most common problems experienced last year with filings was receiving a "Processed Stopped" status from the DOL. Such status indicated that the filing was considered received by the DOL but they could not complete processing it. The most frequent cause for this status involved some type of issue with the signing credentials including credentials (a) entered but not set-up with signing authority, (b) not entered into IFile or the third-party software correctly, (c) not entered on the correct signature line, and/or (d) not entered at all.

Click here to read more about DOL and IRS Annual Filings.

Required Fee Disclosures to Plan Sponsors – 408(b)(2) Interim Final Regulations

DOL issued interim final regulations on ERISA section 408(b)(2) during 2010 relating to the required fee disclosures to retirement plan sponsors. These regulations are another step towards making plan service contracts and fee arrangements more transparent to those charged with governance of benefit plans so that they can appropriately discharge their duties as plan fiduciaries.

Click here to read more about Required Fee Disclosure.

Defined Benefit Plan Amendment Deadline Extended by the IRS

Notice 2010-77, issued in November 2010, further extended the deadline of adopting certain defined benefit plan amendments to the last day of the first plan year that begins on or after January 1, 2011. The additional time will allow plan sponsors to incorporate necessary changes from the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) and Pension Relief Act of 2010.

The notice can be found at

EBSA Enforcement Actions to Protect Employee Contributions

The DOL's Employee Benefits Security Administration (EBSA) recently announced a series of enforcement actions, including both civil and criminal cases, that are designed to protect employee contributions made to retirement and health plans. The EBSA continues its commitment to safeguard employee contributions to employee benefit programs by investigating situations where an employer may either improperly delay forwarding contributions to the employee benefit plan or use the contributions for other personal or business purposes. The agency's first national criminal enforcement project, the Contributory Plan Criminal Project (CPCP), is designed to target persons committing fraud against participants and beneficiaries of contributory retirement and health plans.

Click here to read more about EBSA Enforcement Actions.

Do you have a "Mr. Forfeiture" in your Plan?

"Mr. Forfeiture" will not have an enrollment form for the plan or receive a salary from the plan sponsor. Typically, his social security number is 999-99-9999. He is not an actual participant, but his account in your plan may represent the non-vested portion of terminated participants' account balances for matching or non-elective employer contributions.
Click here to read more about "Mr. Fofeiture."

Are your welfare plans current with their regulatory filings?

In general, health and welfare plans that are fully insured, paid out of the employer's general assets or a combination of both must file an annual Form 5500 if the plan had more than 100 participants at the beginning of the plan year.  Now is a great time to check and make sure that all of those plans are being correctly filed.  If not, there are DOL penalties of up to $1,100 a day and IRS penalties of up to a total of $15,000 associated with an unfiled Form 5500.  The DOL and IRS encourage voluntary disclosure of unfiled Form 5500s, and have reduced the late filing penalties if the plan sponsor voluntarily files the delinquent returns before the DOL sends notice of the delinquency.  Under the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP), the plan sponsor pays a set fee depending on the type and size of plan as well as the number of years being filed.  The fee can be as low as $750 with a maximum fee of $4,000 per plan no matter how many years back you need to submit.  In exchange for filing under the DFVCP and paying the fixed fee, both the DOL and IRS agree to not assess any additional penalties related to the delinquent filings.
Friendly Reminders:

Register for electronic signing credentials which will enable the appropriate individual to electronically sign the Form 5500 and submit it through EFAST2.  Form 5500 signers can log on today and get credentials at

  • Communicate now with service providers regarding any information needed for the additional disclosures related to ASU 2010-6
  • Request from the service providers the auditor's year-end reporting package
  • Request and evaluate SAS 70 reports from all plan service providers
  • Form 11-K filing deadline is 180 days after the plan's year end, generally for calendar year-end plans that would be June 29, 2011
  • Form 5500 filing deadline is seven months after the plan's year end, generally July 31, 2011, for calendar year-end plans (an extension of 2 1/2 months may be requested)

For more information on employee benefit plan audits, please leave a comment below, or contact Dani Gisondo at 440-449-6800. 

Information courtesy of BDO.

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