Articles

The U. S. Department of Labor's Pension and Welfare Benefits Administration has published a final rule that places additional conditions on small businesses that want to avoid having to obtain independent audits of qualified plans they sponsor.

Currently, pension plans with fewer than 100 participants are exempt from the requirement to have an independent qualified public accountant conduct an annual audit of the plan's financial statements. On Dec. 1, 1999, the department published a notice of proposed rulemaking containing additional criteria for small pension plans to be exempt from the annual independent audit requirement under the Employee Retirement Income Security Act.

The final regulation, which is largely unchanged from the proposal, adds new conditions to the audit waiver requirement. The conditions apply to persons who hold plan assets, require enhanced disclosure to participants and beneficiaries, and change bonding requirements.

In recent years, considerable public attention has focused on the potential vulnerability of small plans to fraud and abuse, the PWBA said. Although such circumstances are rare, the department decided it was appropriate to strengthen the security of pension assets and the accountability of persons handling those assets.

"We believe the final rule strikes a reasonable balance between enhanced security and accountability for small plan assets while minimizing the administrative burdens and costs to plans and their sponsors," said Secretary of Labor Alexis M. Herman.

In addition to clarifying the application of the rule, the department extended the effective date of the rule to give the employee benefit community more time to comply with the new requirements. The new conditions in the final rule will apply to the first plan year starting after April 17, 2001. The final rule was published in the Oct. 19, 2000 Federal Register.

Edited by Steve Tarnoff
Managing Editor, HRHub.com
Starnoff@vertical.net