Pension attention: increased regulatory oversight increases pension plan Consulting opportunities for CPAs.

• Author: Ascierto, Jerry
• Position: Certified public accountants

Pension plans and fiduciary responsibility rocketed into the regulatory spotlight with Enron's collapse, and with United Airlines recent high-profile pension plan failure, the increased scrutiny won't be subsiding anytime soon.

Regulators continue to step up efforts to ensure compliance with the Employee Retirement Income Security Act and the DOL is on a second tour of its Fiduciary Education Road Show "Getting It Right," an outreach initiative aimed at fiduciaries in the small and midsize business arena.

This increased regulatory environment provides CPAs with an opportunity to advise small and midsize businesses about shoring up the fiduciary process, from advising on prudent investment practices to tax code compliance.

In fact, in 2004 there was a sizable increase in the use of pension plan advisers. In a survey of 426 U.S. plan sponsors conducted by Deloitte Consulting, 45 percent of respondents reported the use of outside investment consultants, a 10 percent increase over 2003.

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DANGER AREAS

So, what are the major issues facing plan fiduciaries under ERISA? In "Getting It Right," the DOL includes:

* Understanding the plan and one's fiduciary responsibilities;

* Selecting and monitoring service providers;

* Contributing amounts withheld from an employee's paycheck to the plan in a timely fashion;

* Avoiding prohibited transactions; and

* Timely filing annual reports with the government and timely disclosures to participants and beneficiaries.

At first blush, these requirements may not seem daunting, but they can become sizable responsibilities once a pension plan is put in motion.

"The reality is that plan sponsors are not going to be experts on federal pension law or tax law, and for that reason they need to seek and rely on outsiders to advise them," says Robert Doyle, the DOL's director of regulations and interpretations.

In fact, hiring outside experts is much more than a suggestion. ERISA states that "if the trustee or fiduciary involved in selecting the investments doesn't have the requisite level of expertise, they are required--it is their fiduciary obligation--to bring in somebody as an investment adviser to the plan," says Joel Framson, CPA, president of Los Angeles-based Silver Oak Wealth Advisors and chair of the AICPA's Personal Financial Planning Executive Committee.

The consequences of non-compliance can be sizable. The Sarbanes-Oxley Act increased the civil and criminal penalties under ERISA to a maximum fine for individual offenders from $5,000 to $100,000 and the maximum prison term from one year to 10 years. For corporate offenders, the maximum fine has been increased from $100,000 to $500,000.

WHO IS A FIDUCIARY?

Who are the fiduciaries charged with meeting these regulations? According to ERISA, the fiduciary is any person so named in a retirement plan and any person who exercises any discretionary authority or control with respect to the management or administration of the retirement plan or its assets. This includes the plan sponsors, plan administrators, investment managers and trustees--but it also extends to employees responsible for handling the plan and its assets.

"There are a lot of situations where, especially in a small company, day-to-day roles of a fiduciary may not be spelled out in one's job description," says Framson, who edited the AICPA's Personal Financial Planning Committee's Prudent Investment Practices: A Handbook for Investment Fiduciaries.

"People are asked to informally help give an opinion on investment...