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Why Certified Statements Matter

Like most individuals, plan administrators are tasked with finding ways to save money on the plans they administer.  Plans are often reviewed every 3-5 years and Request for Proposals are sent out to ensure they have the best pricing for the services they need.

For ERISA plans, Section 103(a)(3)(A) of ERISA requires a plan administrator to engage an independent qualified public accountant to examine the plans’ financial statements on an annual basis.  This requirement is applicable to plans with more than 100 participants on the first day of the plan year.

There are ways to reduce your annual audit expense.  A plan administrator can elect a limited scope audit in lieu of a full scope audit.  In order for this election to be made and approved, the auditor will forego the investment information as long as a bank or Trust Company, that is regulated and subject to periodic examination by the state, certifies the statements.

The ERISA Plan Auditors have advised that the savings related to the Limited Scope Audit can be substantial, especially as it relates to the complexity of the investments.  For example, a plan with alternative investments not priced at fair value, hard to value securities, or pooled funds, pose more challenges for auditors and thus can increase the cost of the audit. The more supporting documentation the Plan provides on the alternative investments/pooled funds to support the pricing, cost basis, etc., the less onerous it is on the auditor.  This can save the auditor approximately 10-15 hours of work.

This limited scope audit still requires the auditor to review non-investment activity of the plan, such as plan participant eligibility, employee and employer contributions, benefit payments and plan administrative expenses.  Most corporate trustees generally issue professionally formatted asset summaries, income statements and transaction records designed to facilitate the annual audit. Consequently, accountants often charge lower fees for plans with corporate trustees, even when the limited scope opinion is not desired or is not permitted.

Depending on the size of the ERISA Plan, the savings can be significant to work with a bank or trust company that can provide the certified statements to qualify your plan for a limited scope audit.

First State Trust Company, as a corporate trustee,  provides Certified Annual Statements with the following  schedules: balance sheet, cost value reconciliation, total accrued income, 5% transactions, brokerage commissions, ASC 820 report, GASB 40 report and 5500 report detail (schedule H, l&ll) to  assist the auditor in the completion of the  annual audit of a plan which often results in the lower fees to be charged. Please feel free to contact me for additional information about our certified statements or other services.

Helen Garvine MBA, Vice President

The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only.  FSTC does not offer tax, legal or investment advice, professional counsel should be sought for tax,  legal or investment advice.

Helen Garvine MBA
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