In 2008 the Governmental Accounting Standards Pronouncement number 45 (“GASB 45”) went into effect. Since then we’ve seen some changes in actuarial practice, but no significant changes to the accounting guideline itself. But with 2017 that changes, as GASB 45 is being eliminated and replaced with a new standard, GASB 75.
The U.S. Department of Labor conducted a 2015 study of the quality of Employee Benefit Plan (EBP) Audits for the 2011 filing year. They looked at who audits EBPs, the size of CPA firms performing them, the proportion of each CPA practice devoted to them and the overall quality of audits performed. In doing so, they found that 61% of the audits performed were in line with Generally Accepted Auditing Standards (GAAS). However, 39% of the audits contained major deficiencies which could jeopardize plan qualification and result in rejection of Form 5500.
While most Plan Sponsors can tell you off the tops of their heads what their Plan’s eligibility requirements are, the formula for calculating employer contributions and the types of withdrawal features in their Plan; many can’t tell you what their plan’s definition of “Compensation” is. Using the wrong definition of compensation to determine contributions is among the top 5 most common mistakes Plan Sponsors make in operating their retirement plan according to the IRS.
Imagine your 401(k) plan on steroids. Imagine being able to contribute four times more than your current 401(k) limit. Imagine having an balance where investments are managed for you and the investment return is guaranteed. And imagine, upon termination or retirement, taking your balance as a tax-free rollover into an IRA. Well, your imagination may turn to reality, as Cash Balance Retirement plans now provide the above advantages, while opening the door to those looking to sock away a lot more in pre-tax contributions into their ERISA protected retirement savings accounts.
Accounting standards and actuarial guidelines are subject to constant review and revision over time, with a focus on improving the clarity and accuracy of reporting. At Burke Group our commitment is to remain at the forefront of these changes. Recently two new guidelines have been published which could significantly impact the liabilities, reporting, and potentially how employers choose to structure their benefits in the future.
Brian Schiedel is responsible for monitoring daily valuation recordkeeping services, ensuring that transactions meet strict procedural guidelines, and providing compliance and other consulting services for Burke Group’s retirement plan clients. He serves as the direct Relationship Manager for more than 30 retirement plans.
Prior to joining Burke Group, he obtained his bachelor’s degree in management science from the State University of New York at Geneseo. He has also obtained the Qualified 401(k) Administrator (QKA) designation through the American Society of Pension Professionals and Actuaries (ASPPA).