EisnerAmper Blog

The Compensation and Benefits Blog

When Does a Benefit Plan Have to File with the SEC?

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November 14, 2014

By Denise Finney, CPA

Finney_DeniseDoes your defined contribution plan offer employer securities as an investment option?  If so, the plan may be subject to additional filing requirements with the Securities and Exchange Commission (“SEC”).  In general, if employees are given the option to acquire employer securities with their own contributions, additional filings are required with the SEC.  

Form S-8, a registration statement under the Securities Act of 1933, should be filed by the employer to register the employer securities to be acquired under the defined contribution plan.  Form S-8 is updated each year by filing Form 11-K.  Annual reporting on Form 11-K requires an audit in accordance with Public Company Accounting Oversight Board (“PCAOB”) standards.

Plan sponsors should consider the additional SEC requirements in conjunction with their reporting requirements under Form 5500 with the Department of Labor (“DOL”) and Internal Revenue Service, as shown below. 

  SEC Requirements DOL Requirements
Audit Opinion Must not reference GAAS*
Must reference PCAOB
Must Reference GAAS*
Scope of Audit Full scope audit required Limited or full scope audit may
be acceptable
Return due dates
(for 12/31/14 plan year)
Form 11-K due 180 days after
year-end (6/29/15)
Form 5500 due 7 months after
year-end (7/31/15), extended
another 2 1/2 months (10/15/15)


  * GAAS refers to Generally Accepted Auditing Standards

Because of the differences noted above, sponsors of plans requiring SEC reporting will routinely hire an independent public accounting firm to perform a full scope audit, and prepare two separate audit opinions with a target audit completion date of the end of June. 

Tax-Deferred Stock Rights for Offshore Funds

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October 15, 2014

By Peter Alwardt, CPA

Alwardt_PeterUnder Revenue Ruling 2014-18, the IRS has clarified that offshore funds (and other nonqualified entities under Section 457A) may issue nonqualified stock options and stock-settled Stock Appreciation Rights (SAR) without triggering taxation under Section 457A. Prior to this ruling, certain deferred compensation was includible as taxable income of an employee or service provider. This discouraged U.S. based fund managers and service providers from deferring incentive fees from their offshore funds.

The ruling provides a clear fact pattern for a service provider to receive incentive fees on a tax-deferred basis utilizing stock options or stock settled SARs. For more details on the revenue ruling and its impact on compensation from offshore funds, please visit our recent benefits alert here.

Are Your TPAs Booking Journal Entries to Your Plan? Are You Sure?

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September 19, 2014

By Diane Wasser, CPA

Wasser_DianeAs you know, plan sponsors of qualified employee benefit plans are responsible for maintaining and accurately reporting plan activity in order to ultimately provide benefits due to participants. In addition, the processing of the majority of transactions for employee benefit plans is outsourced to third party administrators (TPAs). As part of the oversight of outsourced activities, it is increasingly important to communicate with third party record keepers and custodians regarding any journal entries made to the plan's records. Journal entries in this case can be defined as any adjustment made to originally processed participant-level transaction activity. Third parties collect contributions and allocate them to participant accounts, process distribution and transfer requests, allocate expenses paid from the plan, process loans and allocate investment activity for transactions initiated by participants -- all constituting participant-level transaction activity. Therefore, any adjustments to such originally processed activity are meaningful to plan management and, as part of plan oversight, should be understood and reviewed as necessary.

Pension Funding Relief

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September 4, 2014


By Peter Alwardt, CPA

Alwardt_PeterIn 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21) allowed sponsors of defined benefit plans to smooth out their minimum funding requirements. The initial act provided for a 10% funding stabilization corridor, which would reach 30% by 2016. Under the Highway Transportation and Funding Act of 2014 (the Act) which Congress passed and President Obama is expected to sign into law, the corridor will be extended until 2017.

The net effect of this change is to reduce the required minimum contributions for many defined benefit plans for plan years beginning in 2013 through 2017. If your plan has already had the actuary calculations prepared for 2013, you may elect to apply the new corridor beginning in 2014, so as not to have to redo all of the 2013 valuation work. Certain disclosure requirements have also been extended.

While plan sponsors may be relieved by the reduced funding obligations, be aware of higher contributions required when the funding stabilization corridor expires at the end of plan years beginning in 2017. For more details on the extension and its effect on plan sponsors, please visit our recent benefits alert titled Pension Funding Relief Under MAP-21 to be Extended Until 2017

408(b)(2) Disclosure Guides

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August 12, 2014
By Brenda DeSaro, CPA

DeSaro_BrendaAre you ready to go on a treasure hunt?!?  We are not looking for diamonds, gold or rubies. . .  No, we are looking for details necessary to fulfill the 408(b)(2) fee disclosures.  Are you able to find everything you need to satisfy those 408(b)(2) regulations?  Are you having problems complying with the regulations?  Do you need a map to find all of the disclosures?  Well you are not alone; there may be something in the future to help.

On March 12, 2014 the Department of Labor (“DOL”) proposed a regulation to require a guide (I like to refer to it as a “treasure map”) to assist plan fiduciaries in reviewing 408(b)(2) disclosures. 

The DOL has expressed concern that small plan fiduciaries may be having trouble locating the required details needed to assess the following:  1) if the amounts paid to service providers are reasonable and 2) identify any related parties involved.  These areas are just a few required in order to comply with their fiduciary obligation.  Out of this concern, the March proposal was released.

The proposal suggests a new section to the 408(b)(2) regulations “section 2550.408b-2(c)(1)(iv)(H), Guide to Initial Disclosures.”  Here are some of the highlights in the new section:

  1. The guide may NOT be needed if all of the required items are covered in a single document that does not exceed a certain number of pages.  The DOL has not defined what that magic number of pages will be, but is seeking comments of what would be an acceptable amount.
  2. In the 408(b)(2) regulations, there are covered disclosures that must be communicated to the plan fiduciary.  In the DOL fact sheet, they are listed as:
    • “The description of services to be provided;
    • The statement concerning services to be provided as a fiduciary and/or as a registered adviser;
    • The description of: all direct and indirect compensation, any compensation that will be paid among related parties, compensation for termination of the contract or arrangement, as well as compensation for recordkeeping services;
    • The required investment disclosures for fiduciary services and recordkeeping and brokerage services, including annual operating expenses and ongoing expenses, or if applicable, total annual operating expenses.”
  3. The treasure map needs to identify where to find all the covered disclosures in the other documents.  This guide must list each covered disclosure, which document it is in by title, then page number and section if given.
  4. The guide must be a separate document given with the initial required disclosures.
  5. Any updates or revisions to the guide must be given at least annually.

Remember: At this time, this is just a proposal and not yet in effect.  However, from this proposal, we can see the DOL wants to make it easier for plan sponsors to be able to find the proper disclosure documents.

Office of Inspector General for the DOL Issues Inquiry Letters to Some Plan Sponsors

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August 1, 2014

By Robert Reilly, CPA

Reilly, RobertRecently, the Office of Inspector General (“OIG”) at the U.S. Department of Labor published its Office of Audit FY 2014 Workplan.    Working toward one of the OIG’s goals of safeguarding and improving worker and retiree benefit programs, a number of initiatives were disclosed in the Workplan.   One such initiative is to determine the extent financial institutions that are exempt under the limited-scope audit provision of the Employee Retirement Income Security Act (“ERISA”) have accountability and control over the assets they certify. 

ERISA’s limited-scope audit exemption provides an exclusion from the audit for investments and plan-level investment activity if a qualifying institution, such as a bank or similar organization holding the assets, certifies to the accuracy and completeness of the investment information.  This certification extends only to “ordinary business records” of the certifying institution.   As plan assets continue to include harder to value investments such as hedge funds, private equity and venture capital, it is becoming more important than ever for plan sponsors to have a formal investment pricing policy, oversight and monitoring of investment valuation, as well as to understand what the certifying entity is actually certifying.

Clearly, the OIC is concerned about the investment information included in these certifications and is focusing resources on this issue.   In fact, the OIG has already started sending out letters to some plan sponsors requesting information about the certification and plan sponsors’ investment valuation procedures.

Where Are Your 401(k) Plan Documents?

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July 9, 2014

By Denise Finney, CPA

Finney_DeniseIf someone asked you, as one of those involved with management of your company’s defined contribution plan, to provide a copy of the 401(k) plan document and related amendments, would you know where to find them?  All too often plan sponsors are unable to locate the current version of their 401(k) plan documents and amendments.   Frantically, they scour their files, emails and folders for the documents, only to find multiple versions of what looks to be similar documents which are unsigned and therefore lacking formal execution.  In other instances, the plan sponsor will even be unable to secure a signed and executed version from the company who assisted them with the implementation of the plan.

As a plan sponsor, it is paramount to maintain a complete copy of the signed plan documents and all related amendments for all of your defined contribution and defined benefit plans.  A common mistake observed by the Internal Revenue Service is unsigned plan documents, which can lead to penalties being accessed on the plan sponsor. Thankfully there are ways to fix this mistake, so avoid delay!  The time to determine if you have all of your plan’s documents is now. 

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