FAQ

DOL EMPLOYEE BENEFIT PLANS:

Employee benefit plans are regulated entities and, as such, certain special audit requirements and responsibilities generally apply, as discussed below.

FAQs on Audit Requirements and Responsibilities


Audit Requirements
ERISA contains a requirement for annual audits of plan financial statements by an independent qualified public accountant. Generally, plans with 100 or more participants are subject to the audit requirement. The Department of Labor’s (DOL) regulation (29 CFR 2520.104–46) establishes conditions for small employee benefit plans (generally those with fewer than 100 participants) to be exempt from the general requirement that plans be audited each year. The DOL amended the regulation in October 2000 to impose additional conditions for small pension plans to be exempt from the annual audit requirement. The amendments went into effect beginning in 2001.

View the DOL guidance regarding small plan exemptions

Audit Responsibilities
The independent auditor’s objective and responsibility, under generally accepted auditing standards (GAAS), are to express an opinion on whether the financial statements are fairly presented in conformity with generally accepted accounting principles, and that the related supplemental information is presented fairly, in all material respects, when considered in conjunction with the financial statements taken as a whole. Although the audit requirement in ERISA is an important part of the total process designed to protect plan participants, a GAAS audit is not designed to ensure compliance with ERISA’s provisions. Under the law, plan administrators, the IRS and the DOL have responsibility to ensure such compliance.

Generally, the plan’s audited financial statements accompany the Form 5500 that is filed by the plan administrator. Form 5500 requires footnote disclosure of any differences between the audited financial statements and the statements included as part of the Form 5500. The DOL may reject a filing that has a deficient financial statement audit or that does not properly reconcile information contained in the financial statements with information contained in the Form 5500.

FAQs On The Small Pension Plan Audit Waiver Regulation

What is the Small Pension Plan Audit Waiver Regulation?
The Department of Labor’s regulation at 29 CFR 2520.104-46 establishes conditions for small employee benefit plans (generally those with fewer than 100 participants) to be exempt from the general requirement under Title I of the Employee Retirement Income Security Act (ERISA) that plans be audited each year by an independent qualified public accountant (IQPA) as part of the plan’s annual report (Form 5500).

The Department amended the regulation in October 2000 to impose additional conditions for small pension plans to be exempt from the annual audit requirement. The purpose of the new conditions is to increase the security of assets in small pension plans by improving disclosure of information to participants and beneficiaries and, in certain instances, requiring enhanced fidelity bonds for persons who handle plan funds. The amendments went into effect beginning in 2001.

The Employee Benefits Security Administration (EBSA) has received a variety of questions on how to determine whether a small plan has met the conditions for the audit waiver. The purpose of this document is to answer frequently asked questions about the audit waiver requirements under the amended regulation. Questions concerning this guidance may be directed to the EFAST Help Line at 1.866.463.3278. The EFAST Help Line is available Monday through Friday from 8:00 am to 8:00 pm, Eastern Time.

What pension plans are eligible for an audit waiver under the Small Pension Plan Security Amendments?
Pension plans with fewer than 100 participants at the beginning of the plan year are eligible if they meet the conditions for an audit waiver under 29 CFR 2520.104-46.

Can a plan that utilizes the “80 to 120 Participant Rule” to file as a small plan claim the audit waiver?
Yes. All Schedule I filers that meet the conditions of the audit waiver are eligible. If the plan meets the conditions of the “80 to 120 Participant Rule,” it may file as a small plan and attach Schedule I instead of Schedule H to its Form 5500. Under the 80 to 120 Participant Rule, if the number of participants covered under the plan as of the beginning of the plan year is between 80 and 120, and a small plan annual report was filed for the prior year, the plan administrator may elect to continue to file as a small plan.

Does the plan have to tell participants, beneficiaries and the Department of Labor if it is claiming the audit waiver? If so, how?
Yes. The plan administrator must disclose that it is claiming the waiver by checking “yes” on Line 4k of Schedule I of the Form 5500 filed for the plan.

Does a small pension plan that does not meet the audit waiver conditions need to file Schedule H instead of Schedule I?
No. Small pension plans that cannot claim the audit waiver may still file Schedule I, but must attach the report of an IQPA to their Form 5500. They also do not need to include schedules of assets held for investment, a schedule of reportable transactions, the Schedule C or Schedule G.

If a small plan elects to file as a large plan pursuant to the 80 to 120 Participant Rule, can it still claim the small pension plan audit waiver?
No. Only plans filing as small plans can rely on the small pension plan audit waiver.