The Employee Retirement Income Security Act of 1974 (ERISA) states, in short, that companies must have their annual benefit plan report (Form 5500) audited if you have 100 or more participants in your plan (Companies within the range of 80 to 120 employees have additional criteria to consider). It is the responsibility of the plan administrator to hire independent, qualified public accountants to perform the audit. Manufacturing companies may look to keep costs down by hiring a less experienced accountant. But you’ll want to pay now to save yourself later.
Deficiencies can happen to you.
The U.S. Department of Labor recently revealed from a study of 400 employee benefit plan audit reports that 40% of employee benefit plan audit reports contained major deficiencies with respect to at least one relevant Generally Accepted Auditing Standards requirement. In many cases, those deficiencies can lead to a rejection of the plan’s report; followed by penalties assessed on the company. Nearly $655 billion and 22.5 million plan participants and beneficiaries were put at risk.
What’s more, of those benefit plans studied, 17% failed to comply with at least one of the reporting and disclosure requirements set by the ERISA. You care about your employees and your company. In order to be sure that you are not like the former plans, you need to choose an experienced accountant. A lot of firms tend to specialize in different industries. You’ll want to find one who also specializes in employee benefit plan audits.
So how do you find the right auditor?
- Before the audit, ask questions – You have the right to ask questions and get answers. You’re counting on these people to make sure that your plan is accurate and correct according to the rules.
- Is this accountant a CPA?
- Is this person independent? (They have no financial interest in the plan or sponsor)
- How much experience does this person have? (Is this their first rodeo? Are they a pro in all things employee benefit plan related?)
- Are they (or their firm) registered as a member of the Employee Benefit Plan Audit Quality Center of the American Institute of Certified Public Accountants?
- Did the firm achieve a pass rating in their most recent peer review inspection?
- After the audit. Ask questions – Even though the work is complete, you can still ask questions to help you understand.
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 could impact the tax status?
Were there any transactions that are prohibited under ERISA?
Were there any company processes identified that can be improved?
How else can a qualified auditor help?The more experienced an auditor is, the more she will be able to expand in-depth on the opinion. She’ll be able to highlight any problem areas she came across. And she can come up with ways to improve the plan’s operations.
Contact one of our financial professionals TODAY to learn more about how we can take you to the next step.