News Archive: Section 403(b) Retirement Plans - Preparing for the Audit

For Immediate Release:
October 15, 2008
Contact:
Jesus Guijarro, Audit Manager
(925) 210-2180
jguijarro@rina.com

Beginning with calendar year 2009 Form 5500 filings, employee benefit plans under section 403(b) of the Internal Revenue Service Code that are sponsored by charitable organizations and other not-for-profit organizations and covered under the Employee Retirement Income Security Act of 1974 (ERISA) will be subject to the same reporting and audit requirements currently in effect for section 401(k) plans.

It is expected that many plans will face significant challenges in establishing plan accounting records and proper controls, identifying all participant accounts to be included as plan assets, determining beginning account balances (i.e. comparative balances are also required as of December 31, 2008 for calendar year plans), obtaining other financial information to be included in the plan’s financial statements, and obtaining an unqualified opinion on the plan’s financial statements from the independent auditor.

One of the most challenging issues in preparing for an audit will be creating a complete set of the required books and records to support the preparation of the plan’s financial statements. The records necessary to prepare the books and to conduct the audit will include reports for the plan activity such as contributions, distributions, individual participant account balances, investment schedules, a general ledger and a trial balance. Similar to a section 401(k) plan audit, asset custodians or service providers, once identified, will need to provide the plan sponsor with all these records. Typically, service providers have established a record keeping reporting system to produce what’s known as an Auditor’s Package. This package contains the various reports needed to prepare the audited financial statements and to complete Form 5500.

Typically, the following reports are part of a plan year-end Audit Package:

• Summary of Net Trust Assets
• Summary of Plan Operations
• 5500 Worksheet
• Year End Trial Balance
• Summary of 5% Reportable Transactions
• Schedule SSA Report
• SAS 70 Report
• Trustee Certification (if vendor qualifies to issue one)
• Representation Letter
• Plan Level Activity
• Contributions Plan Level
• Contributions Participant Level detail
• Plan Sponsor TPA Report
• Rollover Contributions Report
• Client Distributions Report
• Forfeiture Detail Report
• Fee Detail
• Annual Loan Balance
• Outstanding Loan Balance
• Default Loan Report

It is important to note that most 403(b) plans have more than one vendor or asset custodian. Obtaining a plan’s audit package from one vendor can be challenging and more so with several vendors. Beginning now to gather audit documentation is highly recommended.

Contact Jesus Guijarro at 925-210-2180 or jguijarro@rina.com so that he can assist you with your first 403(b) plan audit.