The ERISA Advisory Council is examining the retirement plan audit process, and some in the plan sponsor community are concerned its recommendations could lead to additional burdens and costs.
The Employee Benefits Security Administration of the Department of Labor has asked the council to explore the topic, including how plan audits could enhance the safety of plan assets, the efficiency of plan operations and plans' compliance with the Employee Retirement Income Security Act of 1974. The council heard from stakeholders at its June 25 meeting.
If the council were to recommend changes to the way sponsors must select an auditor, such as a step-by-step checklist to which they must adhere, it would be to the detriment of sponsors and their participants, said Will Hansen, chief governmental affairs officer at the American Retirement Association in Washington, who testified before the council last month.
"Any additional mandate from a plan audit perspective would be an increase (in) cost to comply with the new mandate as well as additional time the plan sponsor must spend on compliance," Mr. Hansen said. "The No. 1 and No. 2 reasons why employers don't provide a plan is cost and compliance, and the more burden we put on plan sponsors, the less likely an employer is going to open up a retirement plan."
ERISA requires annual audits of plans with 100 or more eligible participants at the beginning of the plan year. The audits, conducted by an independent qualified public accountant, examine such things as whether plan assets are fairly valued, whether contributions have been made in a timely manner and whether any transactions have been made that are prohibited under ERISA.
In its request to the council, which consists of 15 members appointed by the labor secretary to represent various interests in the retirement landscape, the DOL raised concerns about the "commoditization" of plan audits. It also, according to a notice published by the council last month, said plan administrators were not "sufficiently availing themselves of the audit process to re-examine inputs provided to the auditors, to take advantage of the routine operational discipline that a proper annual audit process should encourage, or to learn about improvements in the plan's documentation, operations, policies or procedures that could arise from a robust audit engagement."