Preparing for the New 403(b) Plan Requirements
12/08/2009
The not-for-profit sector has been raising questions and concerns about how to comply with the new Form 5500 reporting, disclosure, and audit requirements, as issued in July 2007, for 403(b) plans. The time to focus on the particulars is now, however, ERISA-covered 403(b) plans will be subject to the same Form 5500 reporting and audit requirements as 401(k) plans effective with their 2009 plan year.
Despite the Department of Labor’s July 21, 2009 announcement that “transition relief” will be provided to plan administrators, organizations need to comply with the new regulations and show a “good faith” effort in doing so for the 2009 plan year.
The new Form 5500 reporting requirement represents sweeping changes to the administration of 403(b) plans for not-for-profit organizations including government, health care, religious, and higher education entities, as well as certain tax-exempt associations. Specifically, beginning with the 2009 Form 5500, ERISA-covered plans with 100 or more eligible participants will be required to file audited financial statements with their Form 5500. Plans with less than 100 eligible participants may be able to file using a new Short Form 5500 and are generally exempt from the audit requirement.
Lay the Groundwork Now With These 10 Steps
The American Institute of Certified Public Accountants (AICPA) has published ten steps that plan sponsors or administrators can take now to help ensure their plans’ compliance with the new requirements:
1. Understand how the Department of Labor’s new financial reporting and audit requirements will affect your plan.
2. Establish responsibility for the plan’s financial reporting function.
3. Hire a qualified independent auditor for your plan.
4. Communicate with your service provider on the plan’s information needs.
5. Determine what prior year comparative financial information the plan will need.
6. Make sure plan participant records are complete and accurate.
7. Get the plan’s books and records in shape.
8. Establish proper internal controls over the plan’s financial reporting process.
9. Ensure that the plan has an up-to-date written plan document and an investment policy.
10. Ensure that the plan is in compliance with its tax exemption.
What Your Plan Auditor Needs to Know
Your plan’s independent auditor will need to know the answers to dozens of questions about the administration of your plan; this may be particularly challenging as many of these areas may not have been previously monitored or documented. Some of the issues that may be covered include plan reporting and governance, third-party service providers and controls, protection against fraud and the identification of “irregularities,” and virtually any other aspect of plan administration that could affect the plan’s operation and compliance with regulations.
Compliance with the new Form 5500 filing and audit regulations may seem daunting, but your accounting firm can help clarify the issues and help you prepare. Whatever you can accomplish now, ahead of the deadlines—which may seem far away, but really aren’t—will help you comply timely and successfully.
For more information about 403(b) filing requirements, and how J.H. Cohn LLP can help, please contact Evan Zuckerman, CPA, J.H. Cohn partner, at
ezuckerman@jhcohn.com or 877-704-3500.