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

Aug 1, 2014

By Robert Reilly, CPA

Recently, 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 ERISA Section 103(a)(3)(c) audit provision of the Employee Retirement Income Security Act (“ERISA”) have accountability and control over the assets they certify. 

ERISA’s Section 103(a)(3)(c) 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.

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