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In 2001, a revised set of Small Plan
Audit Waiver (SPAW) rules became ef-
fective. These rules revised the con-
ditions that must be satisfied by a
"Small Plan" (i.e., a Plan covering less
than 100 Participants) in order to be
exempt from the requirement to ob-
tain a financial statement audit from
an Independent Qualified Public Ac-
countant (IQPA).
According to the American Society
of Pension Professionals & Actuaries
(ASPPA), the Department of Labor's
(DOL) Inspector General recently be-
gan a review of how the DOL monitors
those plans claiming the waiver. In
fact, they have already sent requests to
Plan sponsors claiming the exemption
requesting information related thereto.
The term "retirement plan" as used in
this article refers to those plans cov-
ered by the Employee Retirement In-
come Security Act (ERISA); generally,
this would include any defined con-
tribution or defined benefit retirement
plan sponsored by an employer that
covers at least one non-owner employ-
ee. Plans funded through Individual
Retirement Accounts (such as SEPs
and SIMPLE IRAs) are not affected by
these rules.
But First, Some Background
The Audit Requirement
Retirement plans with more than 100
Participants as of the first day of the
Plan Year ("Large Plans") must engage
an IQPA to perform a financial state-
ment audit of the Plan. When deter-
mining the Participant count, all of the
following individuals are included:
Employees who are eligible to
receive and/or make any con-
tributions to the Plan, regard-
less of whether or not they
have received and/or made any
such contributions; and
Terminated Participants who have
a vested benefit in the Plan.
If a Plan filed as a Small Plan in the pre-
vious year, the Plan is eligible to file as
a Small Plan again (and can therefore
claim the SPAW) provided there are no
more than 120 Participants. This ex-
ception is known as the "80-120 rule."
Fidelity Bond Requirements
All retirement plans must obtain a fi-
delity bond with coverage equal to at
least the lesser of a) 10 percent of Plan
Assets or b) $500,000. The $500,000
limit increases to $1,000,000 for Plans
holding employer securities. Plans
seeking to rely on the SPAW might be
required to obtain coverage in excess
of these amounts as described more
fully below. When reviewing fidelity
bonds on behalf of your Plan(s) and/or
those of your clients, note the following:
A fidelity bond protects the Plan
from theft of Plan Assets, while
fiduciary insurance protects fi-
duciaries from claims brought by
Employee Benefit Plans Advisory
DOL Begins Review of Plan Sponsors Claiming the
Small Plan Audit Waiver (SPAW)
By David M. Beck, CPA, QPA, ERPA, Member, CTCPA Employee Benefit Plans Interest Group
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