Essential Updates for Employee Benefit Plan Sponsors: Insights from the AICPA Conference
In this episode of the PKF Texas – Entrepreneur’s Playbook®, Jen Lemanski and Audit Director, Kevin Hengst, CPA discuss key takeaways from the AICPA Employee Benefit Plan conference. Kevin highlights important updates from the Department of Labor regarding SaaS 136 compliance, revised civil penalties, and new audit notification initiatives for plan sponsors. He also provides practical advice on managing participant counts and avoiding common filing mistakes.
Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back once again with Kevin Hengst, an audit director and one of the Approachable AdvisorsTM on our employee benefit plan audit team. Kevin, welcome back to the playbook.
Kevin: Thank you, Jen. Glad to be here.
Jen: So, I know you just recently went to the A-I-C-P-A Employee Benefit Plan conference. They do it annually. And are there any takeaways that you heard that you know, would be beneficial for plan sponsors to know?
Kevin: I think there are a few that I would like to share with plan sponsors. Department of Labor was out there and had some very good insight on some of their current initiatives and some of their recommendations that they want all the plan sponsors to know heading into this 2023 plan audit season. Currently the DOL is still looking at SaaS 136, which kind of changed how audits were looking at the 5500 filings, making sure everybody is in compliance with that standard, and if not, they’re sending rejection letters to the plan sponsors in addition to contacting the state boards of the CPAs that perform those audits. The DOL also wanted to let plan sponsors know that there’s a revised monetary civil penalty structure that’s been put in place. It’s basically for the first time in recent memory that fees related to late filings delinquent filings rejections have gone up. So, plan sponsors should definitely be aware that is out there. And they’re also starting a new initiative that they’re sending letters to plan sponsors that are approaching the audit threshold this is a little bit newer. And with technology and them able to determine the number of participants on the form 5500, they’re just kind of not letting plan sponsors know ahead of time and audit is coming. Do your fiduciary duty and selecting an auditor coming up.
Jen: And that number is still roughly a hundred or has that changed at all?
Kevin: The, the number is still a hundred, but it actually did change in how it’s determined. In prior years, it was determined by number of eligible participants. Now it’s determined by the actual number of participants with a balance, you still will count people with a balance that have terminated your plans. So, for your cash out options of 5,000 and below we still recommend plan sponsors can purge those people through, if it’s below a thousand direct cash payout, if it’s between 1,000 and 5,000 sending the money to an IRA on their behalf.
Jen: Perfect. Anything else that you took away?
Kevin: Yeah, they did want to just remind more recommendations as people are filing the 5500, do not include person identifiable information. If you include a social security number, which would be very common on the form 89 55 SSA, all attachments will be rejected. And what that will mean is if they’ve attached the audit financial statements, which they’re required to, it would be rejected if there was any other attachments that had PII. So, very important for plan sponsors to be aware of what they’re filing. They did want to remind plan sponsors to look into the audit rules regarding multiple employer plans and pulled employer plans. They have not changed, but the DOL had seen some misinterpretations of the rules in regards to that. The DOL strongly encourages every plan sponsor to file your 5500 even if an audit’s not complete. There’s always been a little bit of misinformation if a plan sponsor is trying diligently to finish the audit, but it’s not done by the October 15th deadline, whether they should file or not. The DOL strongly recommends.
Jen: Just go ahead and file.
Kevin: And then amend the filing. Once you have the audited financial statements complete. The last, the most important thing is pay attention to Department of Labor letters. Their correspondence gets ignored a lot and that leads into a lot of penalties or bad situations for plan sponsors. Pretty much the timeline is the first letter that the DOL will send out will be considered a notice of rejection. It could be for multiple reasons, but we’ll just go with there was no audit attached. The plan sponsor would have 45 days to respond to that, corrective action would be to file it with attached financial statements. If they ignore that, there will get another letter, which will be a notice of intent to assess. That’s going to be the letter indicating what fines and penalties could be coming their way.
Kevin: Again, the company should respond to that. They have 30 days, 30 or 35 days to respond to that. Depending upon how the Department of Labor sent that letter. If they do nothing with that, then they get a final order. The final order is basically an invoice from the IRS and then you’re going to have to get an ERISA attorney involved, or else pay all the fines and penalties as well as due to corrective actions. If they had respond, they will get a notice of determination. Which will be basically what the DOL feels, the response if it was satisfactory or not. If they view it not as satisfactory they still have one last option to go to an administrative law judge to get items settled. All of that time, money, cost.
Jen: Attorney pay. Pay attention to your mail.
Kevin: Pay attention to your mail. Please respond timely.
Jen: Yeah. And they’re not going to be calling you. It’s going to be all written communication.
Kevin: That is correct. Yeah. Normally it is certified mail, but just pay attention
Jen: Yeah, pay attention to it. Perfect. Well, Kevin, we’ll get you back here in a little bit to talk about some more topics. Sound good?
Kevin: Sounds good Jen, thank you.
Jen: This has been another Thought Leader Production brought to you by PKF Texas – The Entrepreneurs’ Playbook®. If you’d like to hear more about this in other topics, visit pkftexas.com/insights. Tune in next week for another chapter.
