Monthly Archives: March 2011

To find out, read the recent article in Employee Benefit News that highlights a recent study by Towers Watson that shows in 2009, DC plans outperformed DB plans.

According to today’s Associated Press story from David Pitt, 401(k) balances are bouncing back to 2007 levels.

“Americans who were afraid to open their 401(k) statements during the recession are finding good news inside the envelope now: For the most part, their accounts have come all the way back and then some.”

Read the full story here.

Employee Benefit News contributing editor Robert Lawton recenly wrote an article on the top 5 ways to navigate through the world of retirement plan fees. Now that the plans are required to disclose the fees, what do you do with all of this additional information? Lawton tells you where to start.

“On July 16, 2010, the Department of Labor released an interim final regulation relating to the fees that must be disclosed by service providers working with ERISA-qualified retirement plans. All impacted service providers must comply with the new regulation by Jan. 1, 2012.”

Read the full article here.

Mary Nell Billings recently wrote an article for Employee Benefit News about how to better work with 401(k) auditors – and how to manage the process in general. We think she is absolutely right about some auditors not showing advanced planning and preparation – unfortunately, many employee benefit plan audits are mismanaged.  As a firm who takes pride in our efficiencies with 401(k) audits, we hope that you will take her tips to heart and have a smooth audit this year.

Nine audit tips

Here are a few tips to ensure your retirement plan audits meet your goals:

1. Meet with your finance group early in the year and discuss how the audits will be staffed and supported.

2. Prepare throughout the year the schedules and information you know will be requested for the year-end audit.

3. Have a kick-off meeting with the auditors and the finance group well before the audit begins to set expectations, goals and timelines.

4. Manage what will be audited. Some things are standard, others may be a useless exercise, and some may not be identified, but represent an area that needs review in your opinion. Remember the audit should make the plan processes even better and afford more protections for the participants and the company.

5. Hold frequent status meetings to ensure the audit is on track.

6. Keep your senior management informed of the status as well as any potential areas of concern.

7. Stuff happens, so allow extra time in your timeline for unexpected setbacks.

8. Learn from the findings and use this knowledge to improve your internal controls and to better manage your vendors.

9. Hold a debriefing meeting as soon as possible after the reports are issued. -For the full article, please click here.

It is important to know what is going on with those participating in your plan.  For Baby Boomers nearing retirement, many are finding their financial plans are falling short.  Many are postponing retirement, eating out less, cutting back more. Here is an article from the Wall Street Journal that provides details on recent statistics on the gap between what is needed to retire, and what people actually have saved. Click here for the article.

Now that you know auditor communication can provide valuable information to help you improve your plan, let’s look at some of the different types of material you will receive from your auditor. A standard communication that all clients receive to lay the groundwork for the pending audit is the engagement letter. 

Engagement letters establish an understanding with the client about the scope of services to be performed. Typically, this understanding is obtained during the planning phase of the audit, before the auditor performs any significant audit procedures. It may need to be updated during the course of the audit if the scope of the audit changes. The following is a list of matters regarding plan management’s responsibilities and the auditor’s responsibilities that you can expect to see in the engagement letter (this list is not intended to be all-inclusive):

Management is Responsible For:

• Understanding that the objective of the audit is the expression of an opinion on the financial statements.
• The plan’s financial statements and the selection and application of the accounting policies.
• Establishing and maintaining effective internal control over financial reporting.
• Designing and implementing programs and controls to prevent and detect fraud.
• Identifying and ensuring that the plan complies with the laws and regulations applicable to its activities.
• Making all financial records and related information available to the auditor.
• Providing the auditor with a letter at the conclusion of the engagement that confirms certain representations made during the audit.
• Adjusting the financial statements to correct material misstatements and for affirming to the auditor in the management representation letter that the effects of any uncorrected misstatements aggregated by the auditor during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole.

The Auditor is Responsible For:

• Conducting the audit in accordance with GAAS. For plans that file a Form 11-K with the Securities and Exchange Commission (SEC), that audit is also conducted in accordance with standards of the Public Company Accounting Oversight Board.
• Obtaining reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Accordingly, a material misstatement may remain undetected. Also, an audit is not designed to detect error or fraud that is immaterial to the financial statements.
• Obtaining an understanding of the plan and its environment, including its internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing and extent of further audit procedures. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses.
• Making communications to those charged with governance in accordance with generally accepted auditing standards.
• Detailing the estimated fees and billing arrangements.

 Source: AICPA Employee Benefit Plan Audit Quality Center