Notice on Annual Reporting Enforcement Policy [Notices] [11/25/1998]
Notice on Annual Reporting Enforcement Policy [11/25/1998]
Volume 63, Number 227[[Page
65505]]
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Part VIII
Department of Labor
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Pension and Welfare Administration
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Notice on Annual Reporting Enforcement Policy
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
RIN 1210 AA57
Notice on Annual Reporting Enforcement Policy
AGENCY: Pension and Welfare Benefits Administration, Department of
Labor.
ACTION: Notice.
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SUMMARY: The purpose of this notice is to announce the Department of
Labor's decision not to adopt the proposed annual reporting enforcement
policy described in a notice published in the Federal Register on March
13, 1997 (62 FR 11929). Under the proposal, the Department would not
have rejected the annual report (Form 5500) of a multiemployer welfare
benefit plan solely because the accountant's opinion accompanying the
report was ``qualified'' or ``adverse'' due to a failure to account and
report for post-retirement benefit obligations in accordance with
American Institute of Certified Public Accountants (AICPA) Statement of
Position (SOP) 92-6, or otherwise was affected by or reflected
noncompliance with the financial statement disclosure requirements of
SOP 92-6. The proposed enforcement relief also was made available on an
interim basis for the 1996, 1997, and 1998 plan years to provide time
for consideration of public comments on the proposal. Although the
Department has decided not to adopt the proposed enforcement policy, to
provide multiemployer welfare benefit plans with adequate time to
comply with SOP 92-6's requirements, the Department, by this notice, is
extending the interim reporting relief to cover 1999 plan year annual
reports filed by multiemployer welfare benefit plans. Annual reports of
multiemployer welfare benefit plans filed for plan years commencing on
or after January 1, 2000, however, will be subject to rejection if
there is any material qualification in the accountant's opinion
accompanying the annual report due to a failure to comply with the
requirement of SOP 92-6.
FOR FURTHER INFORMATION CONTACT: Eric A. Raps, Office of Regulations
and Interpretations, Pension and Welfare Benefits Administration
(PWBA), U.S. Department of Labor, Washington, DC 20210, (202) 219-8515
(not a toll free number).
SUPPLEMENTARY INFORMATION:
A. Background
In general, the administrator of an employee benefit plan with 100
or more participants at the beginning of a plan year is required under
Title I of the Employee Retirement Income Security Act of 1974, as
amended (ERISA), and the Department's regulations issued thereunder, to
file an annual report and to include as part of that report the opinion
of an independent qualified public accountant.\1\ These annual
reporting requirements are satisfied by filing the Form 5500 Annual
Return/Report in accordance with its instructions and related
regulations. The requirements governing the content of the opinion and
report of the independent qualified public accountant are set forth in
ERISA section 103(a)(3)(A) and 29 CFR 2520.103-1(b)(5). ERISA section
104(a)(4) permits the Department to reject an annual report if it
determines that there is a material qualification by an accountant
contained in the opinion required to be submitted pursuant to section
103(a)(3)(A). If the Department rejects a filing under section
104(a)(4), and the administrator fails to submit a satisfactory filing
within 45 days, the Department may, among other things, assess a civil
penalty of up to a $1,000 a day against the administrator for failing
or refusing to file an annual report.\2\
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\1\ See ERISA sections 101(b)(1) and 103, and 29 CFR 2520.103-1.
\2\ ERISA sections 104(a)(5) and 502(c)(2), and 29 CFR
2560.502c-2. See 29 CFR 2570.502c-2 which, in accordance with the
requirements of the Federal Civil Penalties Inflation Adjustment Act
of 1990, as amended, increased the civil penalty from $1,000 a day
to $1,100 a day for violations occurring after July 29, 1997.
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On March 13, 1997, the Department published a notice in the Federal
Register (62 FR 11929) inviting public comment on a proposed annual
reporting policy for multiemployer welfare benefit plans. Under this
proposed policy, the Department would not reject the annual report of a
multiemployer welfare benefit plan solely because the accountant's
opinion accompanying the report is ``qualified'' or ``adverse'' due to
a failure to account and report for post-retirement benefit obligations
in accordance with the financial statement disclosure requirements of
SOP 92-6. To allow sufficient time for considering public comments on
the proposal, the Department announced in the Federal Register notice
that the Department would not reject 1996 and 1997 plan year
multiemployer welfare benefit plan annual reports due to such qualified
or adverse accountant's opinions. In response to questions, the
Department subsequently clarified the scope of the relief indicating
that it would not reject the subject annual reports because the
accountant's opinion reflects or is otherwise affected by noncompliance
with any aspect of SOP 92-6.\3\ This interim report relief was later
extended to the 1998 annual reports filed by multiemployer welfare
benefit plans.
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\3\ See letter to Cary Hammond from Assistant Secretary Olena
Berg (July 11, 1997).
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B. Non-Adoption of Proposed Enforcement Policy
The Department received public comments supporting and opposing
adoption of the proposed policy. After carefully evaluating all of the
comments received, the Department has decided not to adopt the proposed
enforcement policy.
Section 103(a)(3)(A) of ERISA provides, in relevant part, that the
administrator of an employee benefit plan must engage an independent
qualified public accountant to conduct an examination of any financial
statements, books and records of the plan necessary to enable the
accountant to form an opinion as to whether the financial statements
and schedules, required to be included in the annual report, are
presented fairly and in conformity with Generally Accepted Accounting
Principles or ``GAAP,'' Because the accounting profession establishes
the requirements pertaining to GAAP, it has been the Department's
longstanding position that it generally will not rule as to the
acceptability of methods of accounting or auditing for purposes of the
accountant's opinion required to be attached to the annual report. See,
e.g., Advisory Opinion 84-45A (November 16, 1984).
Although the Department believes that the questions raised relating
to the usefulness of the post-retirement benefit obligation disclosure
required under SOP 92-6 for multiemployer and other welfare benefit
plans have merit, the Department, following consideration of the
comments, has concluded that the accounting profession, rather than the
Department through reporting enforcement policies, should be
responsible for addressing problems attendant to the application of
accounting principles. For this reason, the Department has determined
not to adopt the proposed enforcement policy. The Department, however,
continues to encourage the AICPA, as well as the Financial Accounting
Standards Board, as they review SOP 92-6 to continue to work with the
multiemployer plan community and other interested parties and develop
accounting methodologies for assessing post-retirement benefit
obligations that will serve to produce
[[Page 65507]]
meaningful financial information that will be useful to plan
fiduciaries, plan participants and beneficiaries and the Department of
Labor.
C. Interim Relief and Applicability Date
This notice does not affect the Department's previous announced
interim reporting relief for annual reports filed by multiemployer
welfare benefit plans for 1996, 1997 and 1998 plan years. In addition,
to ensure that multiemployer welfare benefit plans have an adequate
opportunity to prepare their financial recordkeeping and other related
systems so that financial statements can be prepared to comply with SOP
92-6, the Department hereby announces that this same interim reporting
relief will apply for the 1999 plan year annual reports filed by
multiemployer welfare benefit plans. In particular, the Department
understands that multiemployer welfare benefit plans may need this
additional time to be able to present plan year 1999 and plan year 2000
comparative financial statements for Form 5500 filings made for the
2000 plan year. Multiemployer welfare benefit plan administrators who
rely on the interim reporting relief must comply with the AICPA's pre-
SOP 92-6 requirements in their financial statement treatment of the
matters now covered by SOP 92-6. Annual reports of multiemployer
welfare benefit plans filed for plan years commencing on or after
January 1, 2000, however, will be subject to rejection if there is any
material qualification in the accountant's opinion accompanying the
annual report due to a failure to comply with the requirements of SOP
92-6.
Signed at Washington DC, this 18th day of November 1998.
Meredith Miller,
Deputy Assistant Secretary for Policy, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 98-31524 Filed 11-24-98; 8:45 am]
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