SAS 70 on a UK Pension Custodian/Administrator 2541

  • Do you obtain a SAS 70 Type II (or equivalent) on your pension administrator? This would be available quite easily in the US, but we have a UK pension plan that is quite significant. The pension fund has its own set of financials but of course certain expenses would flow to the Company’s F/S so I guess it will need to be covered under our SOX efforts, especially if it is significant. Do you agree? At the lack of a SAS 70 Type II equivalent, I would imagine the local management has to perform their own testing to gain comfort that the administrator’s controls are effective. Is this a right approach?
    Would your answer be different if the pension administrator only does the actuarial calculation (which is outside of SAS70 scope) and is responsible for investing the funds? They do not process the payments.

  • We do obtain a SAS 70 for our pension trustee. We do not obtain one from our actuary.

  • Thank you for the feedback.
    Would you be concerned about how they handle the investments ? They would be directed by the plan document, and is something usually tested in a pension plan audit which is absent in this case. I think that would get outside the main direction of SOX, which targets potential misstatement to the F/S.
    What about how they handle cash receipts and payments? This will have an impact on the F/S, but may not be deemed material enough to warrent a separate SOX test.
    In our situation, the payouts are handled by the Company. The administrator only does the actuary calculation (which is outside the scope of SAS70) and paying some fees.
    This was just brought to my attention and I am trying to see to what extent we need to incorporate into our SOX work. Rather than having a knee-jerk reaction to add something, I am trying to take a step back and see if that’s really needed in the suite of testing.

  • Management of investments would be outside of the scope of SOX except for safekeeping of them. In other words, SOX doesn’t care about the performance of the investments, but does care that they are valued properly.
    I am in the process of getting back up to speed on pension accounting, so I may miss someething. Questions to ask - How are the payments out of the plan communicated to your company to relieve the assets and liabilities on your balance sheet? Are you certain that you are picking up all of the activity? How are you assured that payments out of the plan are to valid retired employees? I assume that this information is also provided to your actuary for monitoring of valuation of the pension liability.

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