Employee Benefit Plans (EBPs) with 100 or more eligible participants at the beginning of the plan year are generally considered large by the Department of Labor and are required to attach an audit to their annual return filing. Selecting an EBP auditor may not be at the forefront of your mind. In fact, it may seem like an afterthought. However, as a plan sponsor, administrator, or trustee, selecting the right EBP auditor is one of your required fiduciary duties to covered beneficiaries.
Why is an EBP audit needed?
Besides complying with the Department of Labor requirements, an experienced auditor will review the processes and make recommendations that will improve the efficiency of the plan administration while maintaining compliance. These recommendations can help protect the financial integrity of the plan and ensure that appropriate funds are available to participants and their beneficiaries.
Who is capable of conducting your EBP audit?
You would not want your surgery performed by a doctor that has not performed the surgery before. Likewise, the right auditor is one that has experience and understands the nuances of EBPs. Plan operations, reporting and compliance requirements are complex. The right auditor is going to have experience in auditing employee benefit plans as well as dedication to staying informed of the latest developments in operations and regulations.
What are the repercussions if a qualified CPA isn’t used to perform your EBP audit?
The Department of Labor has placed the responsibility for selection of the right auditor on you as the plan fiduciary. If they determine that your audit doesn’t meet the standards, the penalties are assessed against you as plan sponsor. These penalties, of up to $1,100 per day, can be assessed until an adequate audit is submitted.
How do I find the right auditor to complete the audit of my EBP?
Selecting an auditor does not have to be a cumbersome task. Prepare a request for proposal that includes details of the plan including: its year-end, size, trustee, administrator and any unique requirements. Request proposals to be completed in a common format with similar information. This will facilitate comparison between the various proposals received. Ask for the prospective auditor’s EBP experience and continuing education plan. We also recommend calling client references to inquire about the firm’s quality, knowledge of issues and requirements, timeliness of audit delivery and value of the management comments and recommendations.
Once technical skills and value of proposed services have been evaluated and qualified firms have been identified, prices can be reviewed.
Remember: the lowest price does not always translate into a quality audit and can result in additional expenses and time related to resolving compliance issues or unqualified audits.
At MarksNelson, our commitment to helping our employee benefit plan clients begins with our dedication to audit quality. Our experience, commitment to training, and use of current technical guidelines helps your plan to be compliant with both the Department of Labor and IRS regulations. Additionally, we offer advice on improving and strengthening processes and compliance related issues.
There are many factors to consider when selecting an EBP auditor, so give yourself plenty of time to research and select the right audit firm. For plans with a year-end of December 31st, the filing deadline is July 31st with a 2 1/2 month extension to October 15th.
If you have any questions or to find the right employee benefit plan audit firm contact Don Towle or your MarksNelson professional.