4150 / What disclosures are required of a CPA who reconciles a plan’s participant records under the DOL 408(b)(2) regulations?

No disclosures are required if the plan does not allow for investment direction by participants, the CPA is paid by the employer, and the CPA does not have a subcontractor or affiliate who receives indirect compensation from the plan.

If this CPA makes a referral to a payroll provider that provides 401(k) recordkeeping services, and the payroll provider that then handles the 401(k) plan pays a referral fee or a disguised consulting fee to the CPA, then the CPA will need to report as a service provider who receives indirect compensation.

If a plan has participant direction and has at least one designated investment alternative or a QDIA, a CPA will be treated as providing recordkeeping services. Then, the general disclosures are required under the covered service classification of recordkeeper. A CPA also may need to provide certain other disclosures based on how it gets paid and the services provided.

Some CPAs have staff that are investment advisors and are registered under state law or the Investment Advisor’s Act of 1940. If these advisors provide services to a plan, then they must provide both the general disclosures and certain additional disclosures based on the type of services that are provided to the plan and the structure of the plan.

If a CPA firm has an affiliate such as an investment advisory group that receives indirect compensation from the plan, then the general disclosures will be required.