Transcript: AICPA National Conference on Employee Benefit Plans Key Points
January 26, 2012
By: Lisa S. Hastings and Stephanie J. Turner Lisa: Hi, this is Lisa Hastings. Stephanie Turner and I attended the AICPA National Conference in Washington, DC just before Christmas, and want to share with you what we learned there. We enjoy attending this conference, as it gives us the opportunity to hear from some of the top talent in this industry, like the Chief Accountant for the DOL (Department of Labor) and expert panels. Would you like to start us off, Steph? Stephanie: What we are hearing from the DOL is that their hot buttons are about educating plan participants. The focus for 2012 is on transparency. The biggest concern on Capitol Hill this year is that as people are approaching retirement, they no longer have defined benefit pension plans to rely on, and they really have no idea how to fund their retirement. With the trend moving away from the employer-sponsored DB plans towards more of the DC plans, distributions are occurring in lump sums. Unfortunately this can result in people not having enough savings to last throughout their entire retirement. Lisa: Pretty scary. I also heard them say that there are now more funds in IRAs than there are in all of the employer-sponsored retirement plans, and they are concerned because IRAs are much less regulated. Stephanie: Another hot topic that Ian Dingwall & Phyllis Borzi, of the DOL, talked about was fee disclosure. This will be useful to our clients in benchmarking their plans' expenses against national survey data that will be available for different ranges of plan assets. Lisa: I enjoyed the tax and regulatory session, also. The speaker emphasized that forfeitures should be allocated on an annual basis, in accordance with the plan document, but that many plans let forfeited monies linger. The session on compliance issues was interesting, too. The speakers said that the problem they see most often is a misinterpretation of compensation, for example, bonuses, tips and commissions not being properly addressed in terms of compensation as defined by the plan document. They also talked about whether severance is considered compensation in relation to the plan, and that it is important to understand how the plan document defines compensation on a case by case basis. Stephanie: There was a fair amount of discussion about timely remittance of employee deferrals in 401K plans. The DOL and other speakers were firm in stating that you need to pick a standard remittance schedule, within the acceptable time frame and stick with it, do not to vary from it. Something new for the 2011 employee benefit plan audits will be that the internal control reports of service organizations, which was formerly known as SAS 70 report, is now known as a SOC 1 report. Your auditors will be asking for a SOC 1, type 2 report, although there are other types of SOC reports for different purposes. The speakers also noted that the reporting and disclosures of plan assets have gotten more strenuous over the past several years, for the clients as well as for the auditors. The intention is for management to have a greater understanding of plan investments, and the increased audit requirements around plan investments mean the auditors are asking more about them, as well. Lisa: One of the last sessions of the conference was about trends in employee benefit plans, which is always of great interest. They presented the findings of a study showing overall investment return in professionally-managed funds exceeded individually-managed assets (like IRAs) by 100-200 basis points. That is a significant net gain to employees and a real incentive for them to participate in employer-sponsored retirement accounts. They also highlighted that, through this recession, there has been a lot of what they called "leakage" of employee retirement assets, through hardship withdrawals, loans and distributions if they are terminated, rather than rolling the assets over into IRAs, but all of which result in the individuals having less assets set aside for their retirement. Throughout the surveys they were also finding a greater importance being placed on retirement plans by the employers than by the employees, which is very discouraging for the employers, and the DOL is not very happy about it either. Stephanie: In defined contribution plans, they noted a trend towards life cycle or target date funds. Increased disclosures regarding investments, fees and expenses are also a trend, as we mentioned before, and The DOL website has good information about fee disclosures that can be very helpful for plan administrators. Lisa: Overall, there was definitely a disparity between what employers are willing to commit to retirement assets and what the DOL wants to see. Only about 20% of all employees have access to defined benefit plans these days, so the idea that people will not have enough money to retire is of great concern, and there are no easy answers forthcoming on that. I think that's about it, Steph, do you think we have covered it all? Stephanie: I think that we hit the highlights, but if anyone has questions about anything we covered, please give one of us a call!
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