ERISA Articles

Pension Abuse Initiative

THURSDAY MAY 15, 1997

WASHINGTON D.C. -- Attorney General Janet Reno and Labor Secretary Alexis Herman today unveiled a successful initiative combat abuse in the nation's pension and retirement fund system During the initiatives there have been 70 cases against pension defendants, including five this morning in Boston.

In the past two weeks alone, federal prosecutors have charged or convicted 24 defendants in 21 cases involving estimated losses to pension plans of more than $17 million.

DOL Requires Audits or "Enhanced Security" for Small Plans

Your "Small Plan" is not Automatically Exempt from a 5500 Audit

Until now, pension plans with less than 100 participants could file their annual reports on Form 5500 as "small plans" and were not required to have an annual audit. Under recently adopted DOL regulations, for plan years beginning after 4/17/01, small plans will have to meet three new "security enhancing" tests to avoid an audit requirement.

What DOL is Watching Now!

I've served labor union clients and multiemployer plans for as long as ERISA has been law, so I have as much experience with DOL audits as anyone. I have always cooperated with DOL auditors, and have found them reasonable and friendly, and the audit process has been routine. And, unless someone filed a complaint against you, you could go years without seeing a DOL auditor.

Not any more!

The Department of Labor has stepped up its enforcement activities dramatically. By one account, DOL wants to audit every union once each three years. (Although, in my experience, they are still not even close to that goal.) And reports from the field are that the auditors are coming in very aggressive and very adversarial.

DOL Limited Scope Exception is Limited

Someone asked me how this affects testing of participant data-- it does not. The exception (described in the EBP Audit Guide 5.13) only allows the auditor to limit testing of investment information certified by a bank or trust company as "complete" and "accurate". Participant data, contributions, benefits, and plan obligations are still major parts of the audit, and the limited scope exception does not apply to these areas at all.

DOL Not Happy with Audit Quality

PWBA Finds Too Many Auditors Missing the Mark ..(3/97)

In March 1997, the Office of the Chief Accountant (DOL- PWBA) issued its findings on audit quality, having analyzed 262 audit reports attached to Form 5500 filings (for years beginning in 1992) to see if audit quality had improved since the 1989 report on deficiencies found by the Labor Department's Office of the Inspector General.

PWBA's conclusion: no significant improvement.

DOL Rates Audit Quality "Needs Improvement"

In several prior studies, ERISA audit qualify has been found deficient. This latest study confirms earlier results, and In this report, DOL attempts to fathom the reasons for the poor performance.

IRS Top Ten ERISA Audit Issues

Drumroll, please. The IRS has compiled a list of the top ten issues arising in its audits of employee benefit plans.

Audits of Financial Statements under ERISA

This is an outline of my presentation to the Nassau Chapter of the New York State Society of CPAs. The presentation draws heavily from the Audit Guide for Employee Benefit Plans (AICPA). I prepared this outline quite a few years ago, and much has changed since then. Please consult a current copy of the Audit Guide. No one should perform audits of employee benefit plans without understanding that publication thoroughly.