Читать книгу Auditing Employee Benefit Plans - Josie Hammond - Страница 25

Because this course is aimed at plans that are subject to audit, it is important to understand the ERISA exemptions from the financial audit for fully insured and unfunded plans. These exemptions generally apply to welfare plans because funding is voluntary for such plans.

Unfunded plans are those in which the benefits are paid entirely from employer general assets (self-insured or self-funded plans), where all benefits are covered by an insurance contract or a combination of both employer general assets and insurances. For this purpose, employee contributions are treated the same as the general assets of the employer as long as the employee contributions are used to pay benefits or premiums within the timeframe set by the ERISA regulations.

Insured plans are those arrangements in which, through the payment of premiums, the obligation to provide plan benefits has passed from the employer to the insurer.

What constitutes a funded plan is not entirely clear under ERISA. It is clear that if a trust has been established in the plan’s name, the plan is funded. This is true even if the trust has no assets. Similarly, if the plan holds assets in its name, such as a checking account, it may be considered funded. If questions arise on whether or not a plan is funded, the auditor should not make that determination. The plan or plan sponsor’s legal counsel should make that determination.

The point is that once any portion of an ERISA plan is funded, the entire plan becomes subject to the ERISA audit requirements. The audit is not limited to the funded portion of the plan, but must cover all plan activities. Further, because the plan is funded, plan assets must be held in trust and are subject to ERISA’s fiduciary conduct standards and non-exempt transaction standards with respect to such assets.