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Audits Are Cause for Pause in DOL Group Retirement Plan Proposal

Sept. 17, 2021, 9:01 AM

Individual auditing requirements in recently proposed federal regulations on consolidated group retirement plan filing are casting doubt on whether workplace plans will join forces.

Benefits attorneys and retirement plan sponsors who hoped 2019 legislation allowing groups of similar plans to file single, consolidated government disclosures would save them money now say that proposed U.S. Labor and Treasury department regulations that would still require annual audits for large employer plans defeat the purpose.

Tumult over the proposed rules could shake up a retirement industry hungry for joint cost-saving measures, driving interest away from group plans to other pooled plan arrangements.

“If this is approved, we’re not even going to bother with it,” said Leisha Gosling, a plan consultant for Retirement Management Services LLC in Louisville, Ky. “I can’t see a lot of providers putting time and effort into combined filings because of these restrictions put on them; it just isn’t cost effective.”

All About Audits

Regulators issued a proposed rule and notice of proposed forms revisions Tuesday outlining a suite of modifications to the Form 5500, an annual filing DOL’s Employee Benefits Security Administration and the IRS use to measure plans’ financial condition, investments, and operational status.

Usually when employers with more than 100 workers file their Form 5500, they must tack on an independent auditor’s report at their own expense. The audit is intended to double-check plan math, but it also can catch legal loopholes plan advisers and attorneys may have missed.

Only small employers are exempt from the requirement, but large businesses that jointly offer a multiple employer plan typically are audited on a revolving basis every two or three years. Plan sponsors that share the same service providers and could file a joint Form 5500 under the 2019 SECURE Act were hoping for the same leeway.

“One of the things they could have done was treat groups of plans like multiple employer plans,” said Pete Swisher, president of Waypoint Fiduciary LLC and managing director of Group Plan Systems LLC. “Audits touch each employer every three years or about a third of the employers are audited each year. It would probably have meant considerably less effort and expense for those participating in groups of plans than what it takes to do it every single year.”

But in the preamble to the rule, regulators said they view audits “as an important financial transparency and accountability condition” for group arrangements. It “would not be possible” to fulfill those goals under a single audit, the regulators said.

The DOL has emphasized that regulators are seeking public input on the proposals, specifically on the issue of individual audits. The agency will accept comments on the proposed rules until Nov. 1.

Additional Relief

The text of the SECURE Act envisioned additional auditing relief for MEPs in the form of what was called “the 1,000/100 rule.” Wording in the legislation allowed the DOL to waive audit requirements for MEPs with fewer than 1,000 eligible participants and no one employer with 100 workers or more.

Tuesday’s proposed regulations didn’t provide that additional relief.

“To the degree that groups of plans are an alternative to other pooled plan options, this proposal probably defeats the purpose,” Swisher said, adding that bundled service options have existed for years, and are likely to continue with or without individual auditing requirements.

“It may now benefit service providers more than it does plan sponsors,” he said.

But the DOL did recommend moving the goalposts slightly on what qualifies retirement plans for annual audits. Until now, retirement plans with 100 or more eligible retirement plan participants would have to file a yearly audit, but the department proposed changing the rule to count only participants with balances in a given plan.

The department said as many as 20,000 plans could save thousands of dollars in auditing costs based on that change.

To contact the reporter on this story: Austin R. Ramsey in Washington at

To contact the editor responsible for this story: Martha Mueller Neff at