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Improvement seen in latest employee benefit plan audits

Rebecca Kehr, CPA | April 2020 Footnote

Editor's note: Updated April 1, 2020

The MNCPA Employee Benefit Plan Task Force last year received 25 reports consisting of 401(k), 403(b), defined benefit, and health and welfare plans for both single and multi-employer plans.

This year’s task force was composed of 17 members, representing 13 Minnesota accounting firms. Submitted financial statements are allocated among the volunteers for individual review. Each report is reviewed by at least two task force members; comments are then shared at a group review day in early January and discussed among the task force. The findings are then shared with the submitting firms by the MNCPA.

The task force continued to see improvement in reports submitted and did not notice a consistent theme in findings on the reports submitted. Highlights include:
  • Reporting of investments and fair value disclosures continued to be challenging. We noted instances where it appeared the type of investments held were not understood, which resulted in improper and incomplete footnote disclosures.
  • Missing and inconsistent treatment of investments reporting a net asset value as a practical expedient, including improper reporting in the fair value hierarchy table and missing unfunded commitment disclosures.
  • Inconsistent reporting between investments shown on the face of the financials and disclosures in the ASC 820 Fair Value Hierarchy table.
  • Incomplete disclosures of fully benefit responsive contracts.
  • Missing language in the certification footnote and improper wording in the basis for the disclaimer of opinion paragraph in the auditor’s report.
  • Missing concentrations of credit risk disclosures.
  • Improper column headings on the schedule of assets held at end of year.
  • Missing supplemental schedule of reportable transactions.
  • When presenting comparative statements of changes in net assets available for benefits, related footnote disclosures were not comparative or, alternatively, when presenting a single year, comparative disclosures were made when not appropriate.
  • Inconsistent reporting and disclosures of plan loans and notes receivable from participants in 403(b) plans.

2020 changes and resources

Changes are coming to the employee benefit plan practice area for the 2020 plan year-ends (audits typically performed in 2021). 

The Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, prescribes certain new performance requirements for ERISA audits, as well as changes to the form and content of the auditor’s report.

As a task force, we expect to see increased volume in the number of reports submitted as this SAS is implemented. The SAS will also be covered at the MNCPA Audits of Employee Benefit Plans Conference, which is being held virtually this year. Additionally, the AICPA publishes an Audit and Accounting Guide for Employee Benefit Plans and, while a new guide will not be published for the 2020 season, auditors should reference the 2019 guide along with the 2020 Auditor’s Practical Companion – Employee Benefit Plans.

Watch for additional communications from the AICPA for the 2021 Audit Guide and other Employee Benefit Plan specific tools. In addition to the guides, additional resources are available on the AICPA Employee Benefit Plan Audit Quality Center website. 

Rebecca Kehr is a director in the employee benefit plan group of CliftonLarsonAllen LLP and has more than 16 years of experience. Her background includes audits of single, multiple and multi-employer employee benefit plans, including 401(k), 403(b), profit sharing, money purchase pension plans, defined benefit, and health and welfare plans. Becky also has consulted on various employee benefit plans regarding administration, operations and compliance, including Affordable Care Act reporting. You may reach Becky at or 612-376-4563. 

More about the task force

The MNCPA Employee Benefit Plan Task Force was created in 2009 to assist plan auditors with financial statement disclosures and reporting. The task force is composed of volunteers who are MNCPA members with experience performing, reviewing and supervising employee benefit plan audit engagements.

MNCPA members’ firms are invited to submit financial statements from the pool of plans they have issued an audit opinion on. The submitting firms’ identities, along with the plan and plan sponsor’s identity, are masked to the task force.