The time is here for employee benefit plans to adopt Statement on Auditing Standards No. 136 (SAS 136), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to the Employee Retirement Income Security Act of 1974 (ERISA).
There are new performance requirements for an audit of an employee benefit plan subject to ERISA effective for all plan years ending after December 15, 2021.
SAS 136 includes new requirements for all areas of the audit and has transformed the auditor’s opinion. Additionally, the terminology of a “limited scope audit” is eliminated and is now referred to as an “ERISA Section 103(a)(3)(C) audit.” Additionally, plan management is now required to acknowledge their responsibility for maintaining a current plan instrument and administering the plan.
If plan management requests an ERISA Section 103(a)(3)(C) audit to be completed, the new requirements for engagement acceptance necessitate that the auditor request plan management’s acknowledgment that plan management has determined that an ERISA Section 103(a)(3)(C) is permitted by performing procedures to determine whether the body that is certifying the accuracy and completeness of the investment information meets the definition of a qualified institution. Additionally, plan management must ensure that the certified investment information is appropriately measured, presented and disclosed in accordance with generally accepted accounting principles.
SAS 136 requires that the auditor receive a copy of Form 5500 in its entirety, including all schedules, for review prior to issuance of the financial statements. Additionally, formal communication during the planning phase of the audit will be provided to the governance group and plan management that addresses the auditor’s responsibility under auditing standards generally accepted in the United States of America, the auditor’s scope and timing of the audit, independence considerations, reliance on the plan sponsor’s internal audit department, and the risks of material misstatement that the auditor considers to be significant.
The following are steps that you can start to take to ensure that you are ready for implementation:
Ensure that you have a current, executed copy of the plan document and associated amendments.
Request a copy of the new audit opinion from your audit team, so that you are aware of what the new opinion looks like for both ERISA 103(a)(3)(C) audits and full-scope audits.
Start to obtain all of the certifications for ERISA103(a)(3)(C) audits. Ask your audit team for templates to document management’s considerations of whether the body that is certifying the accuracy and completeness of the investment information meets the definition of a qualified institution.
Start to talk to your plan’s Form 5500 preparer to ensure that a full draft of Form 5500 will be available for the auditors during their scheduled fieldwork.
Request additional educational materials from your audit team to familiarize yourself with SAS 136.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.