As an employer, you understand the challenges that come with sponsoring a qualified retirement plan. You must keep track of the ever-changing rules from federal agencies like the U.S. Department of Labor (DOL) and IRS. Hiring an independent qualified retirement plan auditor can make it easier for your organization to fulfill its compliance requirements and potentially reduce the risks of plan administration.
A Qualified Retirement Plan Audit’s Purpose
Qualified retirement plans include traditional pensions, 401(k)s, 403(b)s, and some profit-sharing plans. The primary purpose of an audit is to help ensure the plan is operating in compliance with applicable laws as well as the most recent regulations and guidance set forth by the DOL and IRS. An independent audit also reassures stakeholders that your plan’s financial statements offer reliable information.
The Employee Retirement Income Security Act (ERISA) requires annual audits of plans with 100 or more eligible participants at the beginning of the plan year. ERISA also requires plan administrators to follow U.S. Generally Accepted Accounting Principles when creating plan financial statements.
Engaging An Auditor
It’s important to choose your auditor carefully. You’ll of course want to consider the prospective auditor’s professional qualifications, experience, and licensing. But you also must make sure the auditor you engage doesn’t have any financial interests in the retirement plan or plan administrator that could bias the audit. For example, the DOL doesn’t view a plan auditor as independent if that person also maintains the plan’s financial records.
The American Institute of CPAs offers guidance on creating a request for proposal (RFP) for a qualified plan audit. An effective RFP describes the scope of the engagement — including its objectives, special considerations, and expected schedule.
Risks Abound
Unqualified auditors can provide bad information and leave employers vulnerable to unchecked plan failures. This could lead to a DOL investigation and financial penalties. Contact us for more information on qualified retirement plan audits–our team can help.