Employee benefit plans with 100 or more participants must generally provide an audit report when filing IRS Form 5500 each year. Plan administrators have fiduciary responsibilities to hire independent qualified public accountants to perform quality audits.
Select a qualified auditor
Employee Retirement Income Security Act of 1974 (ERISA) guidelines require employee benefit plan auditors to be licensed or certified public accountants. They also require auditors to be independent. In other words, they cannot have a financial interest in the plan or the plan sponsor that would bias their opinion about a plan’s financial condition.
Specialization also matters. The more training and experience an auditor has with plan audits, the more familiar they will be with benefit plan practices and operations, as well as the special auditing standards and rules that apply to such plans. Examples of audit areas that are unique to employee benefit plans include contributions, benefit payments, participant data, and party-in-interest and prohibited transactions.
Employee benefit plan audits are a matter of more than just compliance. The auditor’s report highlights any problems unearthed during the audit, which can serve as a springboard for improving plan operations. The conclusion of audit work is a good time to ask such questions as the following:
- Have plan assets covered by the audit been fairly valued?
- Are plan obligations properly stated and described?
- Were contributions to the plan received in a timely manner?
- Were benefit payments made in accordance with plan terms?
- Did the auditor identify any issues that may impact the plan’s tax status?
- Did the auditor identify any transactions that are prohibited under ERISA?
Experienced auditors also can suggest ways to improve your plan’s operations based on their audit findings.
Employee benefit plan audits offer critical protection to plan administrators and employees. Your company cannot afford to skimp when it comes to hiring an auditor who is unbiased, experienced, and reliable. Contact us for more information on hiring a plan auditor.