BNA reported on August 20th the concerns of the AICPA’s 403(b) Plan Audit Task Force about practitioners “misunderstanding” of the impact of the recently issued DOL FAB 2009-2, where the DOL took steps to alleviate some of the more draconian impacts of the new Form 5500 reporting rules for certain 403(b) plans.
Task force members are reported to say that the relief does not change their duties, as it does not change the DOL regualtions. With this statement, I must strongly but respectfully disagree with my CPA colleagues. For some plans, 2009-2 will make a significant difference in the work that needs to be done.
It is very true that 2009-2 is no panacea. The transition from treating 403(b)s as essentially individual pensions to treating them as fully employer sponsored plans is proving to be more difficult than even the most cynical of us could have imagined. 2009-2 does not change that. There are many unresolved administrative and fiduciary challenges facing 403(b) plan sponsors, and the task force’s concern that some employers may read 2009-2 as bringing more than transitional reporting relief is well founded.
I do empathize with the auditors, as they are the focus of much of the new 403(b) rules. They are learning a new “art”, as the profession (with a few very notable exceptions) has so little experience in this field. The applicability of both GAAP and auditing standards will be difficult in an environment where the fiduciary does not control many of the assets or contracts, a circumstance which may even cause a need to review how those standards should work in this environment. It is not, after all, the same control environment as a 401(k) plan.
But 2009-2 does truly change what the auditors need to do for a number of plans, and employers need to be aware of this.
Employers need to spend time with their auditors and explore where the auditors should be spending their time, and where 2009-2 may (or may not) be of some use to the plan. It means that (for some employers) auditors will not need to spend a lot of employer resources chasing down data which cannot be retrieved (for a large number of reasons, ranging from system limitations to privacy laws). Indeed , the FAB requires auditors to advise plan sponsors of any issue which may materially raise the auditing costs to the plan. Employers should pay attention to this requirement closely, as active involvement in the 403(b) audit may result in significant cost savings. Because the DOL has said it will accept a “qualified” opinion on a 403(b) plan if it is based on 2009-2, the limited auditing resources of some plan sponsors could be better spent establishing “good faith” rather than tilting at the data “windmill.”
One also cannot overlook the 2009-2 value for many smaller employers of not counting many of those old contracts toward the 100 participant audit trigger.
There are severe limitations on 2009-2, to be sure. But those dealing with auditors do need to understand that it will, in at least some instances, change the extent of the work auditors will need to do.