ERISA Section 103(a)(3)(C) Audit | Plan Management Changes

Changes Are Coming to Employee Benefit Plan Audits

Published on by Joe Conover in Assurance, Benefit Plan Audits

Changes Are Coming to Employee Benefit Plan Audits

There’s a new Statement on Auditing Standard (SAS) that will be implemented beginning with either the 2020 or 2021 plan year financial statements. SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA is effective for periods ending on or after December 15, 2021, although early implementation was permitted.

The standard sets new performance and communication requirements when auditing employee benefit plans, and significantly changes the form and content of the auditor’s report on plan financial statements.

ERISA Section 103(a)(3)(C) audits.  New terminology and new audit report

What was previously referred to as a “limited scope audit” will now be performed pursuant to ERISA Section 103(a)(3)(C), which is unique to employee benefit plan audits and not considered a scope limitation.  Similarly, a “full-scope audit” will be referred to as an ERISA Non-Section 103(a)(3)(C) audit.

The audit report will be significantly longer for an ERISA Section 103(a)(3)(C) audit and will include, at a minimum, sections describing the scope and nature of the audit, the opinion on the financial statements, the basis for the opinion, responsibilities of management including a going concern evaluation, auditor responsibilities, a section regarding any supplemental schedules required by ERISA, and a paragraph regarding the prior year auditor report (1st year of implementation only).

Plan Management Responsibilities

At the beginning of the audit process, the engagement letter will now include acknowledgment from plan management for the following responsibilities:

  • Maintaining a current plan instrument, including amendments
  • Administering the plan and determining the plan’s transactions conform with plan provisions
  • Maintaining participant records in a manner to determine benefits due
  • Providing the auditor a substantially complete Form 5500 prior to the dating of the auditor’s report

Additionally, if an ERISA Section 103(a)(3)(C) is performed, plan management must acknowledge responsibility for determining that:

  • An ERISA 103(a)(3)(C) audit is permissible
  • The investment information is prepared and certified by a qualified institution
  • The certification meets the DOL requirements
  • The certified investment information is appropriately measured, presented, and disclosed in accordance with the applicable financial reporting framework

These plan management responsibilities will not only be included in the engagement letter but also listed in the auditor’s report and included in the representation letter signed by plan management at the conclusion of the audit.

Please note – generally, only plans with 120 participants or more require an audit. Learn more in this post on the 80-120 rule.

Auditor’s Communications of Reportable Findings with Plan Management or Those Charged with Governance

In addition to the communications with those charged with governance already required at the conclusion of the plan audit, the auditor is now required to communicate reportable findings from the audit procedures performed.  Reportable findings are:

  • Instances of non-compliance with laws and regulations
  • Significant findings that are relevant to those charged with governance regarding their responsibility to oversee the financial reporting process
  • Internal control deficiencies and other operational errors identified during the audit that, in the auditor’s professional judgment, are of sufficient importance that merit the attention of plan management


This new auditing standard reflects some of the most significant changes to employee benefit plan auditing and reporting in several years.  As a result, your auditor may request additional information from you to perform the plan audit in compliance with this new auditing standard.  Plan management may need to coordinate with the plan’s third-party administrator (TPA) and/or Form 5500 preparer regarding timely access to the return prior to the issuance of the auditor’s report.

Additionally, the Employee Benefit Plan Audit Quality Center of the American Institute of Certified Public Accountants has issued a Plan Advisory that describes plan management responsibilities, illustrations of the new auditor reports, and other aspects of the new standard in greater detail.

Have a Question?

If you’d like to discuss further how the implementation of this new auditing standard will affect your upcoming plan audit, please reach out to one of the Barnes Dennig dedicated Employee Benefit Plan team members. As always, we’re here to help.


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