...from the HR Perspective

Small Plan Waiver of ERISA Audit Requirement

General Rule

The retirement plan (defined benefit or defined contribution) that your company sponsors is subject to the general requirement under Title I of ERISA that plans be audited each year by an independent qualified public accountant (IQPA) as part of the plan's annual report (Form 5500), unless it files Form 5500 as a small plan and attaches Schedule I instead of Schedule H. The exception to the general rule is called the "Small Plan Waiver".

Small Plan Waiver

The Department of Labor's (DOL) establishes the following conditions for small employee benefit plans (generally those with fewer than 100 participants) to be exempt from the audit requirement:

(1) as of the last day of the preceding plan year at least 95% of a plan's assets must be "Qualifying Plan Assets" or, if less than 95% are qualifying plan assets, then any person who handles assets of a plan that do not constitute "qualifying plan assets" must be bonded in an amount that at least equal to the value of the "non-qualifying plan assets" he or she handles. Qualifying Plan Assets defined as:

(a) any asset held by Regulated Financial Institution, such as:

(i) a bank or similar financial institution, including trust companies, savings and loan associations, domestic building and loan associations, and credit unions;

(ii) an insurance company qualified to do business under the laws of a state;

(iii) an organization registered as broker-dealers under the Securities Exchange Act of 1934;

(iv) an investment company registered under the Investment Company Act of 1940; or

(v) any other organization authorized to act as a trustee for individual retirement accounts under Internal Revenue Code section 408.

(b) shares issued by an investment company registered under the Investment Company Act of 1940 (e.g. mutual fund shares);

(d) in the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution describing the plan assets held or issued by the institution and the amount of such assets;

(e) qualifying employer securities, as defined in ERISA section 407(d)(5); and

(f) participant loans meeting the requirements of ERISA section 408(b)(1), whether or not they have been deemed distributed.

(2) the plan administrator must disclose that it is claiming the waiver by checking "yes" on Line 4k of Schedule I of the Form 5500 filed for the plan.

(3) The administrator must include in the summary annual report(SAR) furnished to participants and beneficiaries in accordance with 29 CFR 2520.104b-10, or for defined benefit pension plans in the annual funding notice furnished to participants and beneficiaries in accordance with ERISA section 101(f):

(a) The name of each regulated financial institution holding or issuing qualifying plan assets and the amount of such assets reported by the institution as of the end of the plan year (this SAR disclosure requirement does not apply to qualifying employer securities, participant loans and individual account assets described in paragraph (1)(d), (e) and (f) above);

(b) The name of the surety company issuing the fidelity bond, if the plan has more than 5% of its assets in non-qualifying plan assets;

(c) A notice that participants and beneficiaries may, upon request and without charge, examine or receive from the plan evidence of the required bond and copies of statements from the regulated financial institutions describing the qualifying plan assets; and

(d) A notice that participants and beneficiaries should contact the EBSA Regional Office if they are unable to examine or obtain copies of the regulated financial institution statements or evidence of the required bond, if applicable.

The enhanced SAR disclosure is not required for the following Qualifying Plan Assets:

� qualifying employer securities as defined in section 407(d)(5) of ERISA and the applicable regulations;

� participant loans meeting ERISA section 408(b)(1) and the applicable regulations; and,

� in the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control provided the participant or beneficiary is furnished, at least annually, a statement from an eligible Regulated Financial Institution describing the assets held or issued by the institution and the amount of such assets.

The enhanced SAR disclosure requirements apply even if 95% of the plan's assets are "qualifying plan assets.

(3) in response to a request from any participant or beneficiary, the plan administrator must furnish without charge copies of statements the plan receives from the regulated financial institutions holding or issuing the plan's "qualifying plan assets" and evidence of any required fidelity bond.

Sample Language for Enhanced Disclosure

The regulations do not require that model language be used for the required enhanced SAR (or in the case of a defined benefit plan; the Annual Funding Notice) disclosures, so as long as the SAR (or in the case of a defined benefit plan, the Annual Funding Notice) includes the required information, it will satisfy the audit waiver condition. Although the DOL did not issue model enhanced disclosure text as part of the regulation, they did provide an example, which may assist in composing SAR (or Annual funding Notice) disclosures that would satisfy the regulation. The following language will need to be modified to omit bonding or other information that is not applicable to your plan:

"The U.S. Department of Labor's regulations require that an independent qualified public accountant audit the plan's financial statements unless certain conditions are met for the audit requirement to be waived. This plan met the audit waiver conditions for (insert year) and therefore has not had an audit performed. Instead, the following information is provided to assist you in verifying that the assets reported in the Form 5500 were actually held by the plan.

At the end of the (insert year) plan year, the plan had (include separate entries for each regulated financial institution holding or issuing qualifying plan assets):

[set forth amounts and names of institutions as applicable]

[(insert $ amount) in assets held by (insert name of bank)],

[(insert $ amount) in securities held by (insert name of registered broker-dealer)],

[(insert $ amount) in shares issued by (insert name of registered investment company)],

[(insert $ amount) in investment or annuity contract issued by (insert name of insurance company)]

The plan receives year-end statements from these regulated financial institutions that confirm the above information. [Insert as applicable - The remainder of the plan's assets were (1) qualifying employer securities, (2) loans to participants, (3) held in individual participant accounts with investments directed by participants and beneficiaries and with account statements from regulated financial institutions furnished to the participant or beneficiary at least annually, or (4) other assets covered by a fidelity bond at least equal to the value of the assets and issued by an approved surety company.]

Plan participants and beneficiaries have a right, on request and free of charge, to get copies of the financial institution year-end statements and evidence of the fidelity bond. If you want to examine or get copies of the financial institution year-end statements or evidence of the fidelity bond, please contact [insert mailing address and any other available way to request copies such as e-mail and phone number].

If you are unable to obtain or examine copies of the regulated financial institution statements or evidence of the fidelity bond, you may contact the regional office of the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) for assistance by calling toll-free 1.866.444.EBSA (3272). A listing of EBSA regional offices can be found at www.dol.gov/ebsa. General information regarding the audit waiver conditions applicable to the plan can be found on the U.S. Department of Labor web site at www.dol.gov/ebsa under the heading "Frequently Asked Questions."

Fidelity Bonding For Non-Qualifying Assets

If more than five percent of a small plan's assets are non-qualifying assets, persons handling the non-qualifying assets must be covered by a fidelity bond or bonds that must be at least equal to 100% of the value the non-qualifying plan assets the person handles. Persons handling non-qualifying plan assets can rely on normal rules and exemptions under ERISA section 412 in complying with the audit waiver's enhanced bonding requirement. For example, if the only non-qualifying assets that a person handles are not required to be covered under a standard ERISA section 412 bond (e.g., employer and employee contribution receivables described in 29 CFR 2580.412-5) that person would not need to be covered under an enhanced bond for a plan to be eligible for the audit waiver. Once a small plan has more than 5% of its assets in non-qualifying plan assets, all the non-qualifying assets, not just a selection that represent the excess over 5%, are subject to the enhanced bond requirement.

Alternatively, the person handling the non-qualifying plan assets can obtain his or her own bond. Also, a company providing services to the plan can obtain a bond covering itself and its employees that handle non-qualifying plan assets. The bond has to meet the requirements under ERISA section 412, such as the requirements that the plan be named as an insured, that the bond not include a deductible or similar feature, and that the bonding company be on the U.S. Department of the Treasury's Circular 570 list of approved surety companies. Circular 570 can be found online at www.fms.treas.gov/c570/c570.html.

Drunk? Coffee Won't Get You Sober

Caffeine May Boost Alertness, but It Won't Get You Sober, Study Finds

By Bill Hendrick
WebMD Health News

Dec. 10, 2009 -- Gulping down coffee won't sober you up if you're drunk, but it may make you awake enough to be dangerous, new research suggests.

Researchers draw that conclusion from laboratory experiments on mice, in which caffeine made drunken rodents more alert but didn't reverse learning problems caused by alcohol.

Their study is published in the journal Behavioral Neuroscience.

"The myth about coffee's sobering powers is particularly important to debunk because the co-use of caffeine and alcohol could actually lead to poor decisions with disastrous outcomes," Thomas Gould, PhD, of Temple University and one of the study authors, says in a news release. "People who have consumed only alcohol, who feel tired and intoxicated, may be more likely to acknowledge that they are drunk."

Gould tells WebMD in an email that "coffee may reduce the sedative effects of alcohol, which could give the false impression that people are not as intoxicated as they really are."

But caffeine's effect as a stimulant may create the illusion in intoxicated people that they are alert and competent enough "to handle potentially harmful situations, such as driving while intoxicated or placing themselves in dangerous social situations," Gould says.

He and colleague Danielle Gulick, PhD, now of Dartmouth College, gave groups of young adult mice various doses of alcohol and caffeine by injection prior to learning a maze. A comparison group of mice was given only saline solution.

Alcohol increased movement and reduced anxiety and learning in the mice in proportion to doses given, the researchers say. The drunken mice became more relaxed and moved around more, but learned significantly less than animals given only saline.

The scientists tested three aspects of behavior -- the ability to learn which part of a maze to negotiate in order to avoid exposure to a bright light or sound; anxiety, which was reflected by time spent exploring the maze's open areas, and general locomotion.

The drunken mice learned significantly less well than the sober ones in trying to avoid the frightening bright light or loud noise.

The doses of caffeine given to the mice were the equivalent of one to six or eight cups of coffee for humans.

When caffeine and alcohol were given together, the alcohol blocked caffeine's ability to make the mice more anxious, but caffeine failed to reverse the negative effects that alcohol has on learning, according to Gould and Gulick.

The alcohol calmed caffeine-caused jitters in mice, leaving them less able to avoid threats, the authors say. The researchers write that although a combination of caffeine and alcohol consumed by people "may increase alertness during intoxication, and decrease the awareness of intoxication, there may be no equivalent rescue of learning. Thus, drinkers may consumer more alcohol when they are also consuming caffeine."

"The bottom line is that, despite the appeal of being able to stay up all night and drink, all evidence points to serious risks associated with caffeine-alcohol combinations," Gould says in the news release.