Compliance November 5, 2020

Finding the Right Plan Auditor

While implementing a request for proposals (RFP) isn’t necessary for every plan, issuing one can be a crucial step in determining a quality plan auditor.

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Under the Employee Retirement Income Security Act (ERISA), employee benefit plans with 100 or more participants are required to file a financial audit as part their yearly Form 5500 series filing. Doing so demands hiring an independent auditor.

A financial audit is an accountability tool that ensures a company or entity’s financial statement is accurate. Aside from helping improve plan management, streamlining plan operations and identifying errors, an audit ensures the plan administrator is carrying out its fiduciary responsibility in completing a Form 5500, says Ian MacKay, director of the AICPA Employee Benefit Plan Audit Quality Center.

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The AICPA, or the American Institute of Certified Public Accountants, recently pushed a report emphasizing the importance of a quality plan auditor. In the report, the AICPA breaks down why specific processes, such as a request for proposals (RFPs), are imperative for some plans. While an RFP is not required, some administrators may consider it appropriate to ensure an auditor’s credibility.

MacKay explains that neither ERISA nor the Department of Labor (DOL) require plan sponsors to issue an RFP. “It’s more of the plan fiduciaries and what the plan sponsors think is appropriate,” he says. “A lot may depend on changes of the audit firm or changes in the plan itself.”

Barry Klein, a partner with Carr, Riggs & Ingram LLC, says that while there is no requirement when it comes to the RFP process, plan administrators need to understand their fiduciary duties under ERISA to remain in compliance. Ensuring the plan is properly audited is a part of an administrator’s fiduciary responsibility. If they fail to do so, the administrator risks penalties and potential fiduciary threats. “You want a quality plan auditor because you have a fiduciary responsibility to submit the plan as properly audited,” he says.

If a plan is implementing an RFP, MacKay urges administrators to ensure it includes specific plan details. This will help auditors have a better understanding of the plan they would potentially work with, including the type of plan, plan year end, size and name of any professionals, including custodians, recordkeepers, investment managers and third-party administrators (TPAs).

“Plans will vary from one to the other,” MacKay says. “It’s better to describe as much as you know about the plan, such as the administrator or any other unique things about the plan, so that when the audit firm responds, it has a better sense of the environment and the situation so it can put together a more appropriate proposal.”

When preparing the RFP, the AICPA recommends administrators clearly communicate facts and conditions surrounding the engagement, state objectives and requirements, and include the information needed to properly evaluate the proposal. The AICPA also recommends administrators require the proposals to be presented in a common format to allow for efficient evaluation and comparison.

If the DOL finds that the Form 5500 is professionally substandard and rejects the filing, the plan will accrue penalties until the administrator fixes the noted issue and goes through another audit, Klein says. “It’s a situation you don’t really want to be in as a plan sponsor or fiduciary,” he adds.

With that in mind, some plan sponsors determine it’s crucial that they work with a reliable auditor. The AICPA report lists several key qualifications to look out for when selecting an auditor, including experience, professional development, independence and licensing.

MacKay recommends administrators look for an auditor that has a good understanding of ERISA and DOL regulations, along with unique auditing reporting. “They want to make sure the audit firm knows the auditing process well and has experience,” he says. “If they had experience with the audit firm before, how was the quality of service? Did it meet the expectations of the plan sponsor and administrator?”

It’s also important to determine the terms of the engagement, including the length of time the contract will cover. Depending on the contract, administrators may need to enact RFPs every three to five years, MacKay notes. “Different plan sponsors will have different policies for RFPs, whether it’s every three or five years,” he says.

Benefits November 4, 2020

Best of PSNC 2020: The Future of Student Loan Benefits and What to Expect in 2021

Panelists said encouraging better financial wellness can go a long way to helping workers manage their student loans.

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During the first day of the Best of PSNC (PLANSPONSOR National Conference), Will Sealy, chief executive officer and co-founder of Summer, an organization that helps borrowers with their student loans, said there are 45 million student loan borrowers in the U.S., most of whom have federal loans, the repayment of which was put on hold this year due to the coronavirus pandemic. “But these payments are going to be due in January, averaging $400 a month, and many people may not be able to make these payments,” Sealy said.

There is another program to help borrowers, an income-driven repayment program that lowers federal student loan monthly payments to just 10% of a person’s income, Sealy noted. “Half of all federal loan borrowers can qualify for this program,” he said. “Savings range from $3,000 to $4,000 a year. That is a phenomenal amount of money, representing an income gain for some people of as much as 10% to 20%. But the challenge is that most people don’t know about this program. Only 8 million people have enrolled in it.”

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The Coronavirus Aid, Relief and Economic Security (CARES) Act has a provision that allows employers to contribute up to $5,250 toward a worker’s student loan debt and receive a tax credit similar to the one they get for making a match to a defined contribution (DC) plan, Sealy noted. However, it is set to expire at the end of the year. “There is immense interest in trying to preserve this through proper legislation that will give it longevity, rather than leave it as a stop-gap solution, including a bipartisan bill that came out just a few days ago,” he said.

Sealy also noted that there are a lot of Democratic politicians who have floated the idea of forgiving student loan debt entirely, as well as making state colleges tuition free. “The former would cost upwards of $1.6 trillion and the latter would require a similar amount over 10 years,” Sealy said. He notes that while these proposals are compelling to some voters they are unlikely to pass through Congress due to their overall cost.

Lisa Ledoux, senior director of benefits at Asurion, says that her company has launched a financial wellness program that includes Summer to help its workers with student loans save approximately $300 a month by helping them enroll in a series of federal and state benefits programs. “We have such a huge workforce that a student loan contribution program would cost us several million dollars,” Ledoux said. “Instead, we have opted to help them with their take-home pay and cash flow.”

Jessica Ruggles, director of the financial wellness outcomes practice at Prudential Financial, agreed that financial wellness programs can go a long way to helping people better manage their student loan debt. “They are an opportunity for employers looking to enhance their benefits and to be more paternalistic, while being cost-neutral,” Ruggles said. “Companies that participate in our financial wellness program see an increase of 7 percentage points in their retirement plan, an increase of 8 percentage points in their digital engagement and a 28% improvement in job retention. With these figures in hand, now you can speak the same language as your CFO [chief financial officer].”

Kerry Van Voris, chief people officer at Oscar Health, said whatever types of benefits an employer offers, they need to communicate the upside of each benefit in all different forms. Besides email and the internet, it is important to get senior management in front of workers to talk about the benefits, Van Voris said.

Ruggles said it is also important to survey workers each year to evaluate their financial situations and determine what kinds of benefits could best serve them.

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