| Dear Center Members: |
This alert includes information about:
- EBPAQC tool on peer review findings
- November 9-11 virtual EBP conference
- Form 5500 filings due by extension date of October 15th
- Postponed DB plan required minimum contributions
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New EBPAQC tool on peer review findings in employee benefit plan audits
The EBPAQC has developed a new tool, Peer review findings in employee benefit plan audits, to identify the most frequent Matters for Further Consideration (MFCs) related to employee benefit plan audits and financial statements in peer reviews performed by the AICPA Peer Review team in 2019.
An MFC form is used by peer reviewers to electronically capture "matters" detected during a peer review that are the most granular level of information indicating accounting and auditing deficiencies. The AICPA Peer Review team uses the data to identify problem areas in order to provide firms with tools to increase audit quality. Reviewing these trends can help raise awareness of potential problems at audit firms and significantly improve audit quality.
The tool includes MFCs related to quality control policies and procedures, engagement letters, use of a specialist, risk assessment, internal controls, sampling, SOC 1 reports, testing and documentation, management representation letters, the auditor's communication with those charged with governance, financial statements and the auditor's report, defined benefit plans, ESOP plans, multiemployer plans, and health & welfare plans.
Click here for the EBPAQC Peer review findings in employee benefit plan audits tool.
November 9-11 AICPA Employee Benefit Plans Conference (Live online) — Special Member Benefit
The AICPA Employee Benefit Plans Conference, to be held November 9-11, will be live online. This virtual conference offers for up to 21 hours of CPE credit. This conference is specifically designed over 3 days to allow both east and west coast participants the ability to connect with presenters, peers and colleagues, and learn about pressing issues surrounding employee benefit plans and new products and services from exhibitors. This year's top sessions include:
- SECURE Act & CARES Act Update
- Risk Assessment Standards & COVID-19
- Cybersecurity Incident Response: A Walk Through A Data Breach
- Getting Ready NOW for SAS No. 136
- EBP Town Hall
EBPAQC members qualify for a special $100 discount. Be sure to enter the coupon code "EBPAQC." Register by September 25 and receive an additional early bird discount of $100.
Click here to register for the November 9-11 AICPA Employee Benefit Plan Conference.
Form 5500 filings due by extension date of October 15th
As of the date of this alert the DOL and IRS have not provided additional filing relief related to the COVID-19 pandemic for calendar year 2019 Form 5500 filings due on extension by October 15th. While we have heard from many audit firms that they expect to be able to complete their plan audits by the October 15th due date, some plan auditors may have staff or client circumstances related to the COVID-19 pandemic that will present challenges to completing the audit by the filing deadline. If the plan audit cannot be completed by the October 15th filing deadline, it is important for the plan administrator to know what steps they can take to reduce the risk of potentially significant penalties for an incomplete or late filing and consult with plan legal counsel on the appropriate course of action for remedying an incomplete or late filing.
Incomplete filing without audit report
The DOL expects plan administrators to file a complete Form 5000 filing with the audit report by the October 15th extension filing date. In extenuating circumstances (such as uncontrollable events related to the COVID-19 pandemic) the plan administrator may need to file an incomplete Form 5500 without the audit report. Filing an incomplete Form 5500 may help avoid assessment of penalties by the DOL for failure to file timely (see "Late filing" section below). In such cases, the plan administrator may choose to attach a statement of explanation for the incomplete filing.
When an incomplete filing is made, the DOL may send a letter notifying the plan administrator that the filing was rejected and the plan is given 45 days to file an amended Form 5500. In targeting incomplete filings for rejection, the DOL reviews the submitted filing, including attachments and what actions have been taken or are being taken to mitigate the circumstance of the incomplete filing, and the anticipated completion and amended filing date.
Late filing
Failure to file a timely Form 5500 can result in assessment of penalties by the DOL and IRS. The DOL has the authority to assess penalties on all plans under Title I of ERISA, with the penalty for a late filer being $2,233 per day (adjusted for inflation for penalties assessed after January 15, 2020), with no maximum. The IRS has the authority to impose penalties on qualified plans, funded deferred compensation plans, and fringe benefit plans that file late or materially incomplete returns. The IRS penalty for late filers is $250 a day, up to a maximum penalty of $150,000 per plan year.
DOL's Delinquent Filer Voluntary Compliance Program (DFVCP)
To be eligible to reduce potential civil penalties through the DOL's DFVCP, a plan administrator must comply with the requirements of the program and must not have been notified in writing by the DOL of a failure to file a timely report. Click here for more information about the DFVCP.
Respond to All DOL Correspondence
Plan administrators should respond timely to all DOL correspondence, including the rejection letter. Failure to do so may result in late filing penalties and prohibit the plan from participating in the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP), discussed above.
Postponed DB Plan Required Minimum Contributions
IRS (Notice 2020-61), which provides guidance on pension funding relief provided in the CARES Act (Act), clarifies that deferring payments to defined benefit pension plans does not exempt employers from late penalties in the tax code. The Act permitted single employers with underfunded pension plans to postpone making required minimum contributions until January 2021, at which time the plan sponsor must pay the required contributions plus applicable interest. If such contributions are not paid timely, any unpaid balances are subject to the 10% penalty under Section IRC section 4971. In addition, the IRS clarified that employers that wish to deduct their pension contributions in 2020 must make those contributions before the end of 2020. Auditors may wish to communicate these clarifications to their plan clients in order to avoid surprises at year end. Click here for the IRS Notice.
Sincerely,
AICPA Employee Benefit Plans Audit Quality Center |
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