Brokerage window investments in employee benefit plans. (regulatory matters).
This recent change creates an issue with investment reporting in plan financial statements because GAAP requires the following:
* Identification of investments representing 5% or more of plan net assets in the plan's footnotes. (EBP Guide paragraph 3.28g).
* Reporting of investment income by account type in the statement of changes in net assets or the footnotes.
* Reporting of net appreciation/depreciation by investment type in the plan's footnotes. (EBP Guide paragraph 3.25a).
In addition, plan auditors may experience difficulty in obtaining brokerage window investment information by individual investment categories (common stocks, mutual funds, employer securities, etc.) and brokerage window investment income earned by account type from plan service providers. In plans subject to the limited scope audit provisions of ERISA, the investment certification would only provide investment amounts in total not for the individual investments. However, brokerage window investments are not considered a "fund" or a pooled separate account subject to other reporting requirements. Individual investment information is needed by plan administrators and auditors for the valuation of investment assets in the plan and for audit testing and disclosure purposes in accordance with generally accepted accounting principles and generally accepted auditing standards. Therefore, it is important for plan administrators, recordkeepers and service providers to maintain these records for audit and financial reporting purposes.
Members of the AICPA's DOL Liaison Task Force will continue to work with the DOL as it conducts a review of this alternative reporting method for plans with brokerage windows in an effort to determine whether and under what circumstances such method of reporting may need to be modified to ensure adequate information is provided to plan sponsors, participants and beneficiaries, and the DOL, PBGC and IRS in the future. Also, this alternative method of reporting of participant-directed brokerage window investments does not relieve fiduciaries from their obligation to prudently select and monitor designated plan investment options and brokers.
|Printer friendly Cite/link Email Feedback|
|Article Type:||Brief Article|
|Date:||Apr 1, 2002|
|Previous Article:||Wanted: cases on ethics and fraud issues.|
|Next Article:||Staples becomes latest AICPA affinity partner. (member news).|