Dear Center Members
New DOL Fee Disclosure Rule; FASB Proposes Multiemployer Plan Disclosures; 2010 Membership Compliance Questionnaire; Internal Inspection Best Practices
Quick Links: New DOL Fee Disclosure Rules | FASB Proposes Multiemployer Plan Disclosures for Employers | Prepare for the 2010 Membership Requirements Compliance Questionnaire | Annual Internal Inspection Best Practices | Stay Informed
New DOL Fee Disclosure Rules For Certain Service Providers
DOL issued Interim Final Rule, Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure
(the Rule), in July 2010 (with public comments requested by August 30th), which requires certain service providers to employee pension benefit plans to disclose information to assist plan fiduciaries in assessing the reasonableness of contracts or arrangements, including the reasonableness of the service providers' compensation and potential conflicts of interest that may affect the service providers' performance.
The rule applies to "covered service providers," which is defined in the Rule as a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000 or more in compensation, direct or indirect, to be received in connection with providing one or more of the services described in the Rule pursuant to the contract or arrangement, regardless of whether such services will be performed, or such compensation received, by the covered service provider, an affiliate, or a subcontractor.
The Rule covers fiduciary or registered investment adviser services and certain recordkeeping or brokerage services. The Rule also covers "other services for indirect compensation", including accounting and auditing, and defines "indirect compensation" as compensation received from any source other than
the covered plan, the plan sponsor, the covered service provider, an affiliate, or a subcontractor (if the subcontractor receives such compensation in connection with services performed under the subcontractor's contract or arrangement.)
to read the Rule in its entirety.
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FASB Proposes Improvements to Disclosures about an Employer's Participation in a Multiemployer Plan
The FASB issued a Proposed Accounting Standards Update (ASU), Proposed Improvements to Disclosures about an Employer's Participation in a Multiemployer Plan
, that is intended to increase transparency in financial reporting of entities that participate in multiemployer pension and other postretirement benefit plans. The proposal would require employers to provide more information, including a description of the plans in which the employer is involved, the employer's contractual commitments to the plans, and the expected impact of participating in the plans on the employer's future cash flows (including the potential impact of plan withdrawal obligations).The FASB proposal does not apply to the plan's financial statement disclosures.
The proposal would require the following disclosures, among others:
Total assets and accumulated benefit obligation of the plan;
Quantitative information about the employer's participation in the plan, for example, the number of its employees as a percentage of total plan participants;
A description of the contractual arrangements between the employer and the plan, including the length of the arrangement, the contribution rates agreed to, and any minimum funding arrangements;
Expected contributions for the next annual period;
Known trends in future contributions;
The amount that would be required to be paid upon withdrawal from the plan; and
A narrative description of any funding improvement plans adopted by the plan, including the expected effects on the employer.
If approved, the Proposed ASU would apply to public companies for fiscal years ending after December 15, 2010. It would apply to nonpublic companies for fiscal years beginning on or after December 15, 2010.
Comments are due by November 1. To read the FASB Proposed ASU, click here.
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Prepare for the 2010 Membership Requirements Compliance Questionnaire
In early November all designated partners of member firms as of September 30, 2010 will be receiving an email asking them to complete the firm's annual mandatory 2010 Membership Requirements Compliance Assessment Questionnaire. This online self-assessment questionnaire will ask designated partners to confirm their firm's compliance with the EBPAQC membership requirements as of September 30th. You will also have the opportunity to provide feedback and suggestions on how the Center can improve its support of your firm's efforts in providing quality audit services to your clients.
The compliance questionnaire will also ask you to verify or update your firm's designated partner and administrative contact information. The administrative contact is the individual in your firm who receives the Center dues invoice and will also receive all Center EAlerts (in addition to the designated partner). The administrative contact will default to the designated partner if the firm does not assign a separate individual.
Here are some tips to help you prepare for completing your firm's questionnaire this year:
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Verify that all manager and partners on your firm's EBP audits have obtained 8 hours of employee benefit plan specific CPE within the last 3 years. If a manager or partner has not completed the requisite CPE, are they scheduled to either attend an appropriate CPE course, conference or self-study program to obtain the required CPE?
Review your firm's last internal inspection of your EBP audit practice. Was it completed during the last 12 months? If not, is your firm currently in the process of completing its internal inspection, or is it to be scheduled shortly?
If this is your firm's peer review year, an annual internal inspection is still required. However, the inspection can be modified to avoid duplication of reviews of engagement working paper, report, and client's financial statements. See EBPAQC Membership Requirement Question and Answer No. 7 for more information.
Verify that your firm's last peer review report has been posted on the AICPA's Public File.
Review that your firm's policies and procedures as they relate to your firm's EBP audit practice are up-to-date and communicated to your EBP audit staff.
You may want to review the full list of membership requirements and the membership Q & A on the Center website at www.aicpa.org/EBPAQC
Annual Internal Inspection Best Practices
Center member firms are required to perform an annual internal inspection of their ERISA audit practice even in the year of the firm's peer review. These inspections help firms find and correct weaknesses in their audit practice, develop stronger firm training programs and aid in workpaper consistency throughout the firm. Additionally, the DOL has noted that firms that have strong internal inspection procedures perform better on the DOL firm inspection and workpaper reviews.
The Center website has a document titled A Key to the EBP Audit Quality: Annual Internal Inspection: Best Practices in Firm Monitoring of EBP Audits
. This tool contains a discussion of "best practices" and outlines steps a firm can take toward a successful self-inspection program. It covers aspects such as timing and scheduling of self-inspections, assigning responsibility, identifying appropriate staff to perform the reviews, selecting engagements for review, documenting the review, analyzing and communicating the results to firm staff, and determining appropriate follow-up procedures.
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AICPA Employee Benefit Plan Audit Quality Center
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