When is an audit required for an employee benefit plan?

Generally audits are required when the plan has 100 or more participants.

When can the plan administrator instruct the auditor to perform a limited scope audit?

The plan administrator can instruct the auditor to perform a limited scope audit when the trustee or asset custodian certifies plan statements as being both complete and accurate.

When is an audit required for local government in the State of Utah?

Governments with revenues or expenditures of $350,000 or more must have an audit by a certified public accountant. 

Governments with revenues or expenditures greater than or equal to $200,000, but less than $350,000 must have a review by a certified public accountant. 

Governments with revenues or expenditures greater than or equal to $100,000, but less than $200,000 must have a compilation by a certified public accountant. 

Governments with revenues or expenditures less than $100,000 must submit a financial report on forms provided by the state auditor.

What is management discussion and analysis (MD&A)?

As a result of GASB 34, financial managers will share their insights by giving financial statement readers an objective and easily readable analysis of the government's financial performance for the year. This analysis will provide users with the information they need to help them assess whether the government's financial position has improved or deteriorated as a result of the year's operations.

What are defined benefit pension plans?

These plans provide a promise to pay participants specified benefits that are determinable and are based on such factors as age, years of service, and compensation.

These plans may be funded through accumulated contributions and investment income (self-funded plans), insurance contracts (insured plans), or a combination of both (split-funded plans). Contributions may be required from both employers and participants (contributory plans) or from employers only (noncontributory plans).

Traditional defined benefit pension plans provide benefits that are defined in terms of a percentage of final average compensation or career average compensation, or as a flat dollar benefit per year of service.

What are defined contribution pension plans?

Defined Contribution Pension Plans provide an individual account for each participant and provide benefits that are based on (a) amounts contributed to the participant's account by the employer or employee, (b) investment experience, and (c) any forfeitures allocated to the account, less any administrative expenses charged to the plan. These plans include (a) profit-sharing plans, (b) money purchase pension plans, (c) stock bonus and employee stock ownership plans (ESOPs), (d) thrift or savings plans including 401(k) arrangements, and (e) certain target benefit plans.

Under a defined contribution plan the employer contribution rate is generally determined periodically at the discretion of the employer or by contractual agreement, or both. When a participant retires or withdraws from the plan, the amount allocated to the participant's account (if fully vested) represents the participant's accumulated benefits. That amount may be paid to the participant or used to purchase a retirement annuity. The amount of benefits a participant will ultimately receive is generally not determined until the time of payment. By contrast, in a defined benefit plan, benefits are determinable and the contribution necessary to provide those benefits is actuarially determined. In other respects, defined contribution plans are similar to defined benefit plans.

What are health and welfare benefit plans?

Health and Welfare Benefit Plans include plans that provide (a) medical, dental, visual, psychiatric, or long-term health care; severance benefits; life insurance; accidental death or dismemberment benefits; (b) unemployment, disability, vacations or holiday benefits; (c) apprenticeships, tuition assistance, day-care, housing subsidies, or legal services benefits; and (d) postemployement benefits such as salary continuation, supplemental unemployment benefits, disability-related job training and counseling. Health and welfare benefit plans may be either defined-benefit or defined-contribution plans as explained in the following:

• Defined-benefit health and welfare plans—these plans specify a determinable benefit, which may be in the form of reimbursement to the covered plan participant or a direct payment to providers or third party insurers for the cost of specified services. Such plans may also include benefits that are payable as a lump sum, such as death benefits. The level of benefits may be defined or limited based on factors such as age, years of service, and salary. Contributions may be determined by the plan's actuary or be based on actual claims paid, hours worked or other factors determined by the plan sponsor. Even when a plan is funded pursuant to agreements that specify a fixed rate of employer contributions (for example, a collectively bargained multiemployer plan), such a plan may nevertheless be a defined-benefit health and welfare plan if its substance is to provide a defined benefit.

• Defined-contribution health and welfare plan—these plans maintain an individual account for each plan participant. Such plans have provisions that specify the means of determining the contributions to participants' accounts, rather than the amount of benefits the participants are to receive. The benefits a plan participant will receive are limited to the amount contributed to the participant's account, investment experience, expenses, and any forfeitures allocated to the participant's account. These plans also include flexible spending arrangements

Plan participants may be active or terminated employees (including retirees), as well as covered dependents and beneficiaries, of a single employer or group of employers. Employer contributions may be voluntary or required under the terms of a collective bargaining agreement negotiated with one or more labor organizations. Plans may require contributions from employers and participants (contributory plans) or from employers only (noncontributory plans). During periods of unemployment, a noncontributory plan may require contributions by participants to maintain their eligibility for benefits. Benefits may be provided through insurance contracts paid for by the plan (an insured plan), from net assets accumulated in a trust established by the plan (a self-funded plan), or both.

A health and welfare plan may process benefit payments directly or it may retain a third-party administrator. In either case, a plan that is fully or partially self-funded is obligated for the related benefits.

Health and welfare benefit plans generally are subject to certain fiduciary, reporting, and other requirements of the Employee Retirement Income Security Act of 1974 (ERISA). Plans that are unfunded (that is, those whose benefits are paid solely and directly out of the general assets of the employer), are fully insured (through the direct payment of premiums to the insurance company by the employer), or are certain combinations thereof (for example, self-funded plans with stop-loss coverage) may not be required to include financial statements in their ERISA filings. An understanding of the health and welfare benefit plan is needed to determine its accounting and reporting requirements.