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Returning keynote speaker Phyllis Borzi (Assistant Secretary of Labor, U.S. Department of Labor Employee Benefit Security Administration (EBSA)) addressed the DOL’s recently released report assessing the quality of employee benefit plan audits by CPA firms of all sizes. She expressed concern over the findings and indicated the DOL is considering various enforcement options available to reverse the unacceptably high deficiency rate of approximately 40 percent. More information and a copy of the report can be found on the DOL website. Ms. Borzi also spoke regarding the DOL’s fiduciary rules. In a continuation of her remarks at the 2014 conference, Ms. Borzi championed the concept of “lifetime income” (such as from an annuity) as a potential solution for making participant savings last through retirement.

Conference sessions addressed key accounting and auditing pronouncements/guidance applicable for the 2015 plan audit season:

  • Statement on Auditing Standard No. 128, Using the Work of Internal Auditors (AU-C 610)
  • Accounting Standards Update No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting
  • PCAOB Auditing Standard No. 17, Auditing Supplemental Information Accompanying Audited Financial Statements
  • New AICPA independence rules regarding non-attest services and new PCAOB guidance regarding prohibited financial statement preparation services

Several sessions focused on a better understanding of alternative and hard-to-value investments held by the plan. These types of investments are becoming more prevalent even in smaller plans due to the on-going search for higher investment returns in a low interest-rate environment.

A key conference theme was the various activities ongoing within plans. Plan activities discussed included:

  • Plan mergers and consolidations
  • Increased number of plans requiring an audit for the first time
  • Changes (including declines) in plan sponsor contributions
  • Changes in investment option mix, which in some instances (as noted above) means using higher risk (but potentially higher return) investments
  • Increased availability of annuities as an option for defined contribution plans (as Ms. Borzi noted, annuities may be an attractive option for participants nearing retirement)
  • Pension plan de-risking activities for defined benefit plans

As 2015 is relatively quiet for new accounting pronouncements, it would be a good year for plan management to focus on preventive plan maintenance, such as reviewing plan practices and control processes, ensuring that there have been no issues with recently implemented pronouncements, etc. For additional plan maintenance suggestions, refer to the checklists provided by the IRS.

It would also be a good time to consider the effect of implementation for upcoming effective accounting changes, such as for the pending change to eliminate disclosures for investments where net asset value (or NAV) is used as the “practical expedient” (Accounting Standards Update No. 2015-07, Disclosures for Investments in Certain Entities that Calculate NAV per Share [or Its Equivalent]; and the amendments in ASU 2015-12 ( related to the employee benefit plan simplification initiative released by the Financial Accounting Standards Board (FASB) on July 31, 2015.

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