Audit Changes: Written Reports



Head’s up for plan sponsors: Enhanced audit requirements go into effect on December 15. Aimed at reducing the deficiencies of limited-scope audits, the new audit standard requires a written report from plan sponsors, attesting to their administrative responsibilities.


Problems With Limited Scope Audits?

According to Plan Sponsor, regulators have long been on a path of change related to problems with limited scope audits. Specifically, studies conducted by the Employee Benefit’s Security Administration (EBSA) concluded that “limited-scope audits were a big problem because auditors didn’t evaluate or scrutinize important data they received from recordkeepers; they just signed off on the data.”  As a result, the American Institute of Certified Public Accountants (AICPA) issued a new audit standard for employee benefit plans. The Statement on Auditing Standards No. 136 (aka SAS 136), was slated to go into effect in December 2020, but the timeframe was pushed back one year,  due to the pandemic. Implementation is now upon us.


Expect a Lot of Questions!

That’s what pension industry experts are advising plan sponsors as SAS136 goes into effect. The ERISA Section 103(a)(3)(C) audit, formerly known at the limited-scope audit, will require more content from plan sponsors. For example, as Brent DeMay, from the accounting group at Sikich explained to Plan Sponsor:


Plan sponsors will need to provide a written report to plan auditors acknowledging they have taken responsibility for plan administrative duties. This might include acknowledging that plan documents are maintained and remedial amendments adopted timely, that the plan is being operated according to provisions of the plan document and that the plan sponsor is maintaining sufficient records for any current or future benefits owed to participants.


…The written representation will be attached to the auditor’s opinion. “These changes make the audit opinion more valuable,” DeMay says. “From a communications standpoint, SAS 136 offers more transparency about responsibilities for auditors and plan sponsors. A lot of what’s in the standard falls on the auditor, but the biggest thing for plan sponsors to be aware of is the clarification on having a renewed focus on active oversight of the plan.”


Active Oversight of The Plan

Increased regulatory action—and a swell of lawsuits–make this an especially critical time for plan sponsors to protect both retirement funds and personal assets. No matter how diligent we are in our duties, we can face claims of actual or alleged breaches of our fiduciary obligations—and be held personally accountable. Across the country, plan sponsors are obtaining protection via Colonial Surety’s fiduciary liability insurance. It covers the business—and the plan sponsor—against claims of alleged or actual breaches of duty in connection with the employee retirement plan. Colonial’s  Multi-Year Packages provide the greatest convenience, value and protection:

Choose Your Plan Sponsor Protection Package Here.


Back To Basics?

In addition to securing fiduciary protection,  plan sponsors must also keep the ERISA fidelity bond required by the Department of Labor (DOL) current. Failure to do so has been known to trigger DOL audits. As experts at the National Association of Retirement Plan Advisors (NAPA) explain:


Through examinations of Forms 5500, the IRS has determined that one of the two most common compliance issues among plans is not having adequate ERISA fidelity bond coverage. The DOL, pursuant to ERISA Sec. 412 and related regulations, generally requires every fiduciary of an employee benefit plan and every person who handles funds or other property of a plan be bonded to protect the plans from risk of loss due to fraud or dishonesty on the part of the bonded individuals….


ERISA fidelity bonds protect the assets of your retirement plan from theft—and can only be obtained from a surety listed by the U.S. Department of Treasury. That’s why plan sponsors across the country trust leading national ERISA bond provider, Colonial Surety Company for help ensuring compliance. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Additionally, plan sponsors can opt for cost-saving multi-year coverage, ensuring the ERISA bond remains Department of Labor compliant for the life of its term.


Obtain ERISA Fidelity Bond Here Now.


Where’s Your Three-Point Plan?

It goes without saying that plan sponsors are busy. That’s why Colonial Surety’s unique packages are designed to provide comprehensive coverage—affordably, and efficiently. Come to Colonial and you’ll have your three-point plan in place immediately:


  1. The required ERISA bond protects the assets of the retirement plan from theft;


  1. Fiduciary Liability coverage protects you and your assets from personal liability;


  1. Cyber Liability coverage can safeguard your company and plan from covered losses and expenses in the event of a cyber breach.


Three-Point Protection Plan Here


Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance, and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.


Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country.