Audits are a cause of pause in the DOL group’s pension plan proposal

The individual audit requirements in the recently proposed federal regulations on the filing of consolidated group retirement plans cast doubt on whether workplace plans are joining forces.

Benefits lawyers and pension plan sponsors who hoped the 2019 legislation allowing groups of similar plans to file single, consolidated government disclosures would save them money now say the proposed regulations by the United States Labor and Treasury Departments that would still require annual audits for large employer plans defeat the goal.

The uproar over the proposed rules could rattle a retirement industry hungry for joint cost-saving measures, diverting interest from group plans to other pooled plan arrangements.

“If this is approved, we are not even going to care,” said Leisha gosling, Plan Consultant for Retirement Management Services LLC in Louisville, Ky. “I don’t see a lot of providers spending time and effort on combined filings because of these restrictions placed on them; it’s just not profitable.

All about audits

Regulators have issued a proposed rule and notice of revision of proposed forms Tuesday describing a suite of changes to Form 5500, an annual filing that the DOL Benefits Security Administration and IRS use to measure plans’ financial status, investments and operational status.

Usually, when employers with more than 100 workers file their Form 5500, they have to rely on an independent auditor’s report at their own expense. The audit is meant to double-check the plan’s calculations, but it can also spot any legal loopholes that the plan’s advisers and lawyers may have missed.

Only small employers are exempt from this requirement, but large companies that jointly offer a multi-employer scheme are usually audited on a renewable basis every two or three years. Plan sponsors who share the same service providers and could file a joint Form 5500 under SECURE 2019 hoped to have the same leeway.

“One of the things they could have done was to treat groups of plans as multi-employer plans,” said Pete swisher, Chairman of Waypoint Fiduciary LLC and Managing Director of Group Plan Systems LLC. “Audits affect every employer every three years or about a third of employers are audited every year. It probably would have meant a lot less effort and expense for those participating in diet groups than it takes to do so each year. “

But in the rule’s preamble, regulators said they saw audits “as an important condition of financial transparency and accountability” for group agreements. It “would not be possible” to meet these targets in a single audit, regulators said.

The DOL has highlighted that regulators seek public opinion on proposals, in particular on the issue of individual audits. The agency will accept comments on the proposed rules until November 1.

Additional relief

The text of the SECURE law provided for additional audit relief for MEPs in the form of what has been called the “1000/100 rule”. The wording of the legislation allowed the DOL to waive audit requirements for MEPs with less than 1,000 eligible participants and no employer with 100 or more workers.

The proposed regulations on Tuesday did not provide this additional relief.

“As bundle plans are an alternative to other bundled plan options, this proposal likely defeats the purpose,” Swisher said, adding bundled service options have been around for years and will continue. probably with or without individual audit requirements.

“This could now benefit service providers more than plan sponsors,” he said.

But the DOL recommended shifting targets slightly on what qualifies pension plans for annual audits. Until now, pension plans with 100 or more eligible members had to submit an annual audit, but the ministry proposed to change the rule to only count members with balances in a given plan.

The ministry said up to 20,000 plans could save thousands of dollars in audit costs based on the change.


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