Although SAS 136 was effective for plan years ending on or after December 15, 2021 (and most calendar year-end plans are heading into their second year under the SAS), the Department of Labor (DOL) has indicated that there is still some confusion surrounding how to fill out Schedule H, Part III – Accountant’s Opinion, Lines 3(a) and 3(b) of Form 5500. It appears that some Form 5500 preparers of retirement plans, whose independent qualified public accountants performed an ERISA Section 103(a)(3)(C) audit, are answering Lines 3(a) and 3(b) incorrectly by selecting the wrong type of audit opinion and/or failing to indicate whether the audit was performed in accordance with ERISA Section 103(a)(3)(C).
Disclaimer of Opinion
Prior to SAS 136, auditors of retirement plans were able to issue a disclaimer of opinion because of the lack of audit testing over assets that were covered under a qualified organization certification. This disclaimer of opinion was allowed by ERISA and, if coded correctly on Schedule H of Form 5500, was not rejected by the DOL if the disclaimer was solely because limited procedures were performed on these certified assets. SAS 136 changed the opinion provided from a disclaimer of opinion to a dual-pronged unmodified opinion. This dual-pronged opinion includes an unmodified opinion rather than a disclaimer of opinion. Given this change, the Form 5500 preparer should check the “Unmodified” box on Line 3(a). In addition, if an ERISA Section 103(a)(3)(C) audit was performed, box 3b(1) (DOL Regulation 2520.103-8) should be checked. Conversely, if a Non-ERISA Section 103(a)(3)(C) (formerly full scope) audit was performed, box 3b(3) should be checked.
There are still instances in which the “Disclaimer” box should be checked on Line 3(a). This is most common for 403(b) plans with records issues associated with beginning of year balances or exclusion of certain contracts under the DOL FAB 2009-02. As with the unmodified opinion, the preparer should check either box 3b(1) for an ERISA Section 103(a)(3)(C) audit or box 3b(3) for a Non-ERISA Section 103(a)(3)(C) audit.
The DOL has indicated that they will be sending letters out to plan administrators to ensure that this section of Form 5500 is completed correctly. Plan sponsors and Form 5500 preparers should review it in detail to ensure accuracy before finalization.
Please contact us if you have questions about the information outlined above, our seasoned and experienced employee benefit plan professionals are here to help. You can also learn more about our Employee Benefit Plan Audit services by visiting our website.