Nonprofit Organizations Need to Prepare Now for New 403(b) Plan Audit Requirements...

Nonprofit Organizations Need to Prepare Now for New 403(b) Plan Audit Requirements in 2009

Amazingly, Many Not-for-Profit Organizations Do Not Have the
Necessary Accounting Records and Controls to Audit Their Retirement
Plans Next Year
NEW YORK--(Business Wire)--
Offering a 403(b) retirement plan to your employees is about to
get a whole lot more challenging. The Department of Labor had exempted
not-for-profit organizations from its reporting and audit requirements
for employee benefit plans - until now. Beginning next year,
not-for-profit organizations that offer employees ERISA-covered 403(b)
plans will be required to file a Form 5500 annually with the
Department of Labor, just as for-profit companies have done for 401(k)
plans for years. Additionally, large 403(b) plans, which cover 100 or
more participants, will have to include an audited financial statement
with their Form 5500 filings.

However, this will be a daunting task for not-for-profit plan
sponsors, which have never had to keep 403(b) plan financial records
before. They didn't even need to have a written plan document.(1) CFOs
of not-for-profit entities simply signed up service providers, let
employees open their accounts, and deducted and remitted contributions
from employee paychecks. "Now not-for-profit plan sponsors will find
themselves in a pickle because they won't have all the accounting
records they need to receive an unqualified audit opinion," warns
Barry Wechsler, CPA, a not-for-profit accounting expert and partner
with Buchbinder Tunick & Co. LLP, which devotes more than half of its
practice to employee benefit plans. He's advising clients to start
preparing for next year's 403(b) audit right now.

One further complication: Although the amended regulations are not
effective until plan year 2009, the Department of Labor requires
auditors to measure 2009 figures against comparable information from
the prior year. "Our audit staff will need to look at 2008 year end
plan value, what the employer owes to the plan, accounts payable, and
accrued expenses," notes Mr. Wechsler. "None of this information is at
the plan sponsor's fingertips."

The amended regulations apply only to 403(b) plans subject to the
Employee Retirement Income Security Act of 1974 (ERISA), which in
general are plans sponsored by charities and schools. ERISA generally
does not apply to 403(b) retirement plans offered by religious
organizations and governments. Approximately 16,000 of existing 403(b)
plans will be affected, including 7,000 plans large enough to require
audited plan financial statements, according to the Department of
Labor.

-0-
*T
What Plan Sponsors Should Do

1. Find out whether you need to submit audited plan financial
statements with your Form 5500.
Filing requirements are determined by the number of plan participants.
In general, 403(b) plans with 100 or more eligible participants will
need to submit audited financial statements with their Form 5500.

2. Hire an experienced employee benefit plan auditor.
The Department of Labor has stated the primary reason why audits are
found to be deficient is that the auditor lacked experience. It
recommends choosing an auditor that performs employee benefit plan
audits on a regular basis, such as firms that belong to the AICPA
Employee Benefit Plan Audit Quality Center.

3. Identify all of your service providers and plan participants.
Your plan may include service providers and former employees that are
hardly active, but you are obligated to include them in your Form
5500. You can use the IRS's or Social Security Administration's
Letter Forwarding Program to help find them.

4. Determine what 2008 comparative financial information you'll need
for next year's audit.
The Department of Labor requires that the financial statements report
prior year financial information, even though the amended regulations
don't take effect until Plan Year 2009. Therefore, you will need to
calculate certain information, including the current value of plan
investments, the amounts of employer's contributions owed to the
plan, accounts payable, and accrued expenses as of the end of the
plan year. Your auditor can help you gather this information this
year.

5. Establish proper internal controls.
As a plan sponsor, you have to implement practices, procedures, and
policies designed to safeguard the assets of the plan from fraud or
error and ensure accurate recordkeeping. A plan audit includes
careful examination of your internal controls, so work with your
auditor to establish proper controls this year.
*T

About Buchbinder Tunick & Co.

More than half of Buchbinder Tunick & Company's practice is
devoted to employee benefit plans. Our 401(k) and other employee
benefit plan audit specialists perform dozens of plan audits each
year, serving clients nationwide from our offices in New York and
suburban Washington, DC. Our firm and its partners are members of the
American Institute of Certified Public Accountants (AICPA), the AICPA
Employee Benefit Plan Audit Quality Center, Enterprise Network
Worldwide, the International Foundation of Employee Benefit Plans, The
Profit Sharing/401(k) Council of America, the Association of
Practicing CPAs, and multiple State Societies of CPAs. For more
information, visit www.buchbinder.com.

(1) But that's changing. The IRS is requiring them beginning Tax
Year 2009.

Harrison Edwards PR
Jeannie Mandelker, 914-242-0010
jeannie@harrison-edwardspr.com

Copyright Business Wire 2008