An employee benefit plan audit is something a plan administrator should see as a tool to help protect their most valuable company asset – their employees. In 1974, the Employee Retirement Income Security Act (ERISA) was established to set minimum standards for employee benefit plans of private-sector employees. Over the years, it has been amended numerous times to strengthen the protection of employee benefit plans. Enforcement of the ERISA regulations is handled through the Department of Labor (DOL). The DOL has the authority to investigate and/or audit an employee benefit plan.
A quality audit should reduce the risk of a DOL audit of the plan. Properly prepared financial statements, as well as timely filings, are important to show an understanding and compliance with ERISA. Issues that are discovered during the annual audit are discussed with the plan administrator and corrective action can be taken prior to the DOL finding them. When the plan self-corrects to ensure compliance prior to a DOL investigation or audit, significant penalties can be avoided and will reduce the likelihood of DOL findings in an audit.
It is the responsibility of the plan administrator to maintain the plan and its financial records. Those records must be provided in a neat and orderly fashion to the plans’ auditor in a timely manner. If a third-party is administering the plan, it is important to be sure to pre-arrange for access to the records for the auditor.
Some examples of issues that we have identified in audits we have performed include:
- Timely remittance of participant contributions
- A mismatch between plan documents and the summary plan description
- Incorrect plan entry dates
- Improper documentation for hardship contributions
- Incorrect matching calculation
- Determination of who is considered an active employee
It is important to work with a CPA Firm that is knowledgeable and experienced with employee benefit plan audits. The DOL, and other regulatory bodies that oversee EBPs, have increased scrutiny surrounding the administration and reporting of these plans.
A quality audit will assist in protecting the assets and financial integrity of your EBP, as well as help you meet your fiduciary responsibility related to the plan. With more than 15 years of experience performing quality EBP audits, our team is prepared to help you navigate through the process of your EBP audit.
Get support from the MFB team for your first or next EBP audit. Call 631-537-2300 and ask for Joe Mammina or Christina Galasso to get started today.