Employee Benefit Plan Seminar Takeaways: Audit & Accounting, Tax, Tech and Legal

In June, we hosted a seminar on the key items facing employee benefit plan administrators. Below are the top takeaways from the program.

Changes on the Horizon: Accounting Standards & Audit Update

  • SOC reports provide a deeper understanding of your service provider’s complex control environments and are key to your organization’s overall risk assessment process.
    • Request a copy of your service provider’s SOC report and review the auditor’s opinion, control environment, key controls and exceptions noted during auditor testing.
  • Plan fiduciaries should understand the CPA firm’s qualifications and the quality of audit work they perform.
  • Statements on Auditing Standards (SAS) 134 and 135 were recently issued to improve key audit matters in governance communications, change the face of the audit report and more closely align AICPA guidance with PCAOB standards. The standard is effective for years ending after 12/15/20.
  • The limited scope audit (disclaimer of opinion) will be eliminated and replaced with a different version when the standard becomes effective. The standard is effective for years ending after 12/15/20.
  • ASU 2017-06 – Master Trust Accounting Disclosures includes changes to reporting plan’s interests in Master Trusts and investments by general type; the ASU is effective for fiscal years beginning after 12/15/2018.
  • ASU 2018-13 – Fair Value Measurement modifies disclosure requirements in ASC Topic 820 and applies to all entities required to disclose recurring and non-recurring fair value measurements; ASU is effective for fiscal years beginning after 12/15/2019

High Tech – High Tide: Cybersecurity Risks for Employee Benefit Plans

  • 92% of all successful attacks come through email (files, links, macros).
  • Healthy email security significantly reduces risk. Email security and awareness should be a top priority when starting and continuing good cybersecurity hygiene.
  • Businesses aren’t simply protecting their digital assets, but also the people whose lives could be affected by a significant data breach or compromised network. The majority of cyber-attacks can be avoided by practicing three main basics:
  1. Applying the True/False test to every email: Do I know the sender? Am I expecting an attachment?
  2. Applying multi-factor authentication to email systems.
  3. Using a password manager to avoid password re-use.

Waves of Information: Tax Impact of Executive Compensation

  • There are many forms of executive compensation, each with their own unique tax attributes.
  • Incentive stock options (ISOs) and nonqualified stock options (NQSOs) are great ways to pass on stock ownership to your executives, but proper tax planning is needed to get the best taxation based on the executive’s personal tax situation.
  • When exercising a stock option, understand the grant, exercise and sales dates of your stock options.
  • Know the tax differences between qualified and non-qualified retirement plans and how they could influence your current and future compensation. Understand how payroll taxes are also affected by these.
  • Fringe benefits such as health insurance, automobiles, parking and club dues are also forms of compensation.

Hot Topics in Law: The Latest in Legal Changes

  • Equal Employment Opportunities Commission is expected to release new regulations in 2019 for wellness regulations subject to ADA/GINA (biometric assessments).
  • Proposed Health Reimbursement Account (HRA) rules applicable in 2020 remove the current prohibition of using HRA money to purchase individual coverage.
  • A major retirement bill will likely be passed by Congress in 2019 that impacts multi-employer plans, the auto-enrollment cap, minimum distribution rules and part-time employee eligibility.
  • Favorable IRS determination letter program will be reopened for hybrid and merged plans.
  • Bipartisan Budget Act of 2018 has lessened requirements for hardship distributions.’
  • Plan fiduciaries of defined benefit plans should consider revisiting their use of outdated mortality tables based on results of actuarial equivalency cases for MetLife, American Airlines, and PepsiCo.

Let us know if you have questions on any of the points covered during the seminar or if you missed the seminar and would like to request a walk-through.

About the Authors

James E. Merklin
James E. Merklin
Partner, Assurance and Advisory


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