Recent Posts:

---

Using Force Out Distributions to Avoid a 401(k) Audit

---

Decoding IRS Notice 2023-43: Easier 401(k) Error Fixes!

---

401(k) audit – 2023 Form 5500 changes

---

New Audit Standard (SAS 136)

---

401(k) Service Providers and the Role They Serve

---

Frequent 401(k) Audit Finding Series - Documentation Failures

---

Withdraw from Your 401(k) at Age 55

---

What is a 3(16), 3(21), or 3(38) Fiduciary?

---

---

View AllSubscribe

New Audit Standard (SAS 136)

In the past, there were two audit choices when satisfying Form 5500 filing requirements: (1) Full scope audits and (2) Limited-scope audits.  Form 5500 filing statistics support that nearly every employer who qualified would select a limited-scope audit.  The reason for this is that in a limited-scope audit, the auditor was not required to test certain investment information contained in the certified statements (think mutual fund valuations at specific points in time, dividend declarations, etc.).  As such a limited-scope audit took less time and translated to a more affordable solution.

Moving forward, the limited-scope audit is a term of the past; these audits will now be referred to as Section 103(a)(3)(C) audits, the section of Employee Retirement Income and Security Act of 1974 (ERISA) which allows this approach.

ERISA hasn’t changed, but the new accounting standard (SAS 136) requires that the Plan Sponsor be responsible for determining that the Plan’s investment information has been certified by a bank or similar institution, or by an insurance company, that is regulated, supervised, and subject to periodic examination by a state or federal agency (qualified institution). 

The Plan Sponsor is also required to verify that the certification statement is signed by an authorized representative and certifies both the accuracy and completeness of the investment information.  The certification should include language very similar to the following sample certification language:

The XYZ Bank (Insurance Carrier) hereby certifies that the foregoing statement furnished pursuant to 29 CFR 2520-103-5(c) is complete and accurate.

The CPA firm must then review the certification to determine if they agree with the Plan Sponsor's conclusion on whether the Plan qualifies for a Section 103(a)(3)(C) audit.