Benefits Byte

October 2, 2019

ERISA Advisory Council Drafts Recommendations for State Escheatment and Audit Process

The ERISA Advisory Council (EAC) held a teleconference meeting on September 25 to discuss draft reports on its chosen issues for 2019: Beyond Plan Audit Compliance: Improving the Financial Statement Audit Process and Permissive Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Funds.

The EAC is a group of benefits experts – including representatives from the employer community – established by Congress and appointed by the Department of Labor (DOL) to identify emerging benefits issues and advise the Secretary of Labor on health and retirement issues. The group meets four or more times annually to select and discuss issues for the year, hear testimony, and develop recommendations. Once members reach a consensus on recommendations, a report is prepared with the recommendations and sent to DOL for consideration in performing its duties under ERISA.

In June and August, the EAC heard from witnesses on the two issues for 2019. The American Benefits Council’s Jan Jacobson, senior counsel, retirement policy, testified on one of these issues at the June 26 hearing about the critical role of the employer-sponsored retirement plans when considering rules regarding voluntary escheatment from ERISA plans to state unclaimed property funds. 

Recommendations at the September 25 teleconference were generally consistent with previous discussions as described in the August 30 Benefits Byte.

Permissive Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Funds

With regard to permissive transfers of uncashed checks to state unclaimed property funds, members decided not to recommend specific state requirements for receiving uncashed checks, but rather to ask DOL to provide a set of best practices. They will also recommend that DOL clarify that:

  • ERISA preempts any unclaimed property law.
  • Voluntary transfer to a state is considered a payment of benefits under ERISA.
  • A plan fiduciary will satisfy its fiduciary responsibility in transferring uncashed checks to an unclaimed property fund as long as the state a check is escheated to meets a certain set of best practices 

Beyond Plan Audit Compliance: Improving the Financial Statement Audit Process

With respect to improving the financial statement audit process, the EAC will not recommend incentivizing or mandating increased education for plan administrators. Instead, the EAC will recommend that DOL should:

  • Send notices to plan administrators advising them on their responsibilities with respect to a financial statement audit process.
  • Publish a revised brochure detailing the selection, retention, and interaction with independent financial statement auditors, including a best practices checklist.
  • Publish a list of common deficiencies found in plan audits.
  • Make more information available to plan administrators regarding auditor qualifications and make the EFAST2 database searchable by auditor.
  • Expand its financial statement audit education programs to target plan advisory groups.

The EAC will provide a formal presentation of its recommendations to the DOL later this year, followed by a written report released early in 2020.

For more information on the EAC hearings, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.