ERISA Audit | Employee Benefit Plan Audit Services

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Employee Benefit Plan Audit Checklist

Companies that provide employee benefit plans for at least 100 participants are, in most cases, required by federal law to conduct an employee benefit plan audit (also called ERISA audit) in order to file the annual Form 5500-series report.

The plan administrator or sponsor is encouraged to designate an independent certified public accountant to conduct this audit.

CMP can audit the following as needed:

401(k) plans
General Benefit Plans
Pension Plans
Defined Benefit Plan
Defined Contribution Plan
Employee Benefit Plans

Hiring a qualified CPA to conduct an ERISA audit provides many benefits, including:

Protection of your employee's assets to ensure the integrity of funds for healthcare, retirement, etc.
Fulfill your legal responsibility as part of your company’s federal tax obligations
Protect you from penalties resulting from an inaccurate or incomplete report

What Exactly do Employee Benefit Plan Audits Cover?

INTERNAL CONTROL EVALUATION

As part of our audit, we will provide guidance regarding the internal controls governing your...

As part of our audit, we will provide guidance regarding the internal controls governing your employee benefit plan. Though the administrator is ultimately responsible for a plan’s internal controls, the recommendations we provide will help ensure that your plan’s internal controls are in accordance with best practices and legal requirements.

DOL COMPLIANCE AND AUDIT PREPARATION

When your company is chosen for an audit, the Plan Sponsor will receive a letter requesting...

When your company is chosen for an audit, the Plan Sponsor will receive a letter requesting a list of documents for DOL review. The DOL will typically want to see documents dating back three to six years.

We help companies prepare for these audits by providing them the required documentation and knowledge to ensure compliance with DOL requirements. We also review your plan to make sure it is currently meeting all legal requirements, and if it is not, we tell you what you need to do to fix it.

LIMITED SCOPE AUDITS

In some cases, federal law allows the plan administrator to limit the scope of an employee benefit...

In some cases, federal law allows the plan administrator to limit the scope of an employee benefit plan audit. Specifically, audit limits are allowed when financial institutions are in possession of plan assets and provide the proper written documentation stating this. We will help you determine if your plan is eligible for a limited audit.

FINAL REPORT

After conducting our audit, we will give you a full report with our opinion on the plan’s financial statement, and also advise you on any further actions you need to take to complete the filing of your audit (such as filing additional schedules). We will also report on any financial issues we find with your plan, and suggest ideas for improving your plan’s internal processes.

Importance of Hiring an Employee Benefit Plan Audit Quality Center Member

WHAT IS THE EMPLOYEE BENEFIT PLAN AUDIT QUALITY CENTER AND WHY WAS IT ESTABLISHED?

The Employee Benefit Plan Audit Quality Center is a firm-based voluntary...

The Employee Benefit Plan Audit Quality Center is a firm-based voluntary membership center for firms that audit employee benefit plans, including pension, health and welfare, and 401(k) plans subject to the Employee Retirement Income Security Act (ERISA) under the regulatory authority of the U.S. Department of Labor (DOL).

The AICPA established the Center to help CPAs perform quality audits by providing resources and guidance to help them navigate the increased complexity of employee benefit plan auditing.

HOW DOES THE CENTER BENEFIT YOU AS THE CLIENT?

As a member of the Employee Benefit Plan Audit Quality Center, our CPA firm has...

As a member of the Employee Benefit Plan Audit Quality Center, our CPA firm has made a commitment to adhere to significant quality and continuing education standards that ensure you will receive a high-quality audit. AICPA

As a Center member, we receive comprehensive resources to assist us in performing employee benefit plan audits. We receive up-to-date information on a variety of technical, legislative and regulatory subjects that we then apply to your employee benefit plan audit to help ensure that you are in compliance with the appropriate standards and changes in regulation. These resources help us respond nimbly to new standards and requirements to ensure the efficiency of your audit engagement.

HOW DOES CENTER MEMBERSHIP IMPACT THE AUDIT TEAM THAT IS CONDUCTING YOUR ORGANIZATION'S AUDIT

Our firm is committed to ensuring that our audit personnel are...

Our firm is committed to ensuring that our audit personnel are well trained to deliver employee benefit audit services. Further, our Center membership dictates that we document a program that consists of on-the-job training and minimum CPE requirements for all personnel conducting employee benefit plan audits to ensure that they stay current on the applicable professional standards, rules and regulations for ERISA employee benefit plan audits. This translates into a highly competent team of auditors who are knowledgeable in the unique requirements of quality employee benefit plan auditing and ensures that we deliver the reliable, accurate information you need to prepare your plan’s summary annual report and confidently manage your plan.

WHAT ARE THE QUALITY REQUIREMENTS OF THE CENTER?

In addition to the resources and information on current regulations and...

In addition to the resources and information on current regulations and standards affecting audits, the Center requires our firm to adhere to significant membership requirements including designating a partner to be responsible for our employee benefit plan audit practice, meeting quality control standards and establishing annual internal inspection procedures. This inspection includes a review of our firm’s employee benefit plan audit practice by individuals with specific knowledge of ERISA employee benefit plan audits and standards. The review must be made available to our firm’s peer reviewer, who conducts a review and evaluation of our firm’s auditing and accounting functions so we can meet state licensing, federal regulatory and/or AICPA membership requirements. In addition, we must make our peer review findings publicly available.

Employee Benefit Plan Audit Questions and Answers

WHY SHOULD A RETIREMENT PLAN AUDITOR HAVE EXPERIENCE IN AUDITING RETIREMENT PLANS?

With the abundance of regulations that are associated with retirement plans...

With the abundance of regulations that are associated with retirement plans, it is important that your auditor have experience and expertise in this specific area. Retirement plan audit work requires continual training to stay up on the last legal changes. An auditor with experience in retirement plan audits can help guide you through the myriad issues that can arise, and provide assurance that your plan is in proper compliance with all legal requirements. prepare your plan’s summary annual report and confidently manage your plan.

WHY DOES A RETIREMENT PLAN AUDITOR NEED TO BE INDEPENDENT?

The auditor of your defined benefit plan must be able to give an...

The auditor of your defined benefit plan must be able to give an impartial opinion on the financial state of your plan. In order to do this, the auditor cannot have any financial stake in the plan or the company that would any way affect their opinion.

DOES CHOICE OF YOUR RETIREMENT PLAN AUDITOR MATTER?

The auditor of your benefit plan must be able to give an impartial opinion on the...

The auditor of your benefit plan must be able to give an impartial opinion on the financial state of your plan. In order to do this, the auditor cannot have any financial stake in the plan or the company that would any way affect their opinion.

WHY DO I NEED TO CHECK THE AUDITOR'S LICENSES AND REFERENCES?

The Department of Labor can require a plan administrator to redo their...

The Department of Labor can require a plan administrator to redo their audit if the auditor is not properly licensed in the state in which the audit occurred. It is also important to see what your peers are saying about your plan auditor so that you can make sure you are getting the value and expertise you are looking for from your auditor.

WHY DO I HAVE TO SIGN AN ENGAGEMENT LETTER FOR OUR RETIREMENT PLAN AUDIT?

An engagement letter will help define the scope of the engagement that...

An engagement letter will help define the scope of the engagement that your retirement plan auditor will perform. It should give details of the work to be perform, the timeline for the audit, and the fee. An engagement letter will also usually include the responsibilities of each party to make sure that the audit runs as smoothly as possible.

HOW CAN RETIREMENT PLAN AUDITS ADD VALUE?

At Cook Martin, we provide real value by being a great year-round resource to...

At Cook Martin, we provide real value by being a great year-round resource to the plan sponsor. We emphasize critical plan operations as the first building block of complete and accurate financial statements. We also understand the industry and the plan sponsor’s goals, and help streamline plan processes to tip the scales from detection of errors to prevention of errors. At Cook Martin, we incorporate value-added procedures that will help employers be IRS-ready, and result in added peace of mind.

WHEN IS AN AUDIT OF THE RETIREMENT PLAN FINANCIAL STATEMENTS REQUIRED?

Large qualified retirement plan Form 5500 filings must include...

Large qualified retirement plan Form 5500 filings must include financial statements that have been audited by an Independent Public Accountant. However, some large plans may be eligible for a limited-scope audit rather than a full-scope audit. Smaller plans can seek to have the requirement waived if they meet certain criteria.

DO I NEED A 401K AUDIT?

An annual benefit plan audit is required to be performed by a...

An annual benefit plan audit is required to be performed by a qualified third-party CPA firm when certain conditions are met – primarily, when the number total eligible participants reaches 100, and the plan is deemed a “large” plan.

WHAT IS A LARGE PLAN?

A benefit or retirement plan with 100 participants or...

A benefit or retirement plan with 100 participants or more as of the first day of the plan year.

HOW DO YO TELL IF YOU HAVE OVER 100 ELIGIBLE PARTICIPANTS?

Check your 401 (k) Form 5500 as filed. If the total number of eligible...

Check your 401 (k) Form 5500 as filed. If the total number of eligible participants at year-end are over 100, your 401 (k) Plan is required to have an independent CPA Firm audit for this year. If you start at less than 80 you do not need an audit until you have 120 participants.

WHAT IS THE 80-120 RULE?

The 80-120 Rule provides that so long as the number of plan participants...

The 80-120 Rule provides that so long as the number of plan participants on the first day of the plan year is between 80 and 120, the plan sponsor may elect to file the same type of Form 5500 it filed in the previous year. This is not a one-time election. So long as a plan that has previously filed as a small plan continues to have between 80 and 120 participants on the first day of the plan year, the plan sponsor can continue to elect to file as a small plan. Please note that the 80-120 election is not available for plans in their initial year, since those plans did not file a Form 5500 in the previous year. A new plan with 100 participants on the day of inception must attach audited financial statements to its large plan filing.

WHAT DOCUMENTATION DO I NEED TO BE READY FOR AN EMPLOYEE BENEFIT PLAN AUDIT?

The majority of the reports will be provided to us by the custodian of the...

The majority of the reports will be provided to us by the custodian of the investments. Once we are engaged to perform the audit, we will contact the custodian to request that these reports be sent to us. We will also request from the employer selected copies of its reports generated from its HR and Payroll department as it relates to the 401(k) plan participants. These types of reports can be scanned, mailed, or faxed to us. We have developed a checklist of materials needed for an employee benefit plan audit that we expect will be a helpful resource to you in the planning of your audit. Please contact us for a free copy.

UNDER WHAT CONDITIONS CAN SMALL PLANS WAIVE THE REQUIREMENT FOR A BENEFIT PLAN AUDIT?

Small retirement plans with fewer than 100 participants at the beginning...

Small retirement plans with fewer than 100 participants at the beginning of the plan year can claim a waiver from the audit requirement if they meet the conditions of DOL Regulation 29 CFR 2520.104-46:

As of the last day of the preceding plan year, at least 95% of a small retirement plan’s assets must be “qualifying plan assets” or, if less than 95% are qualifying plan assets, then any person who handles assets of a plan that do not constitute “qualifying plan assets” must be bonded in an amount at least equal to the value of the “nonqualifying plan assets”

The plan must include additional information in the Summary Annual Report (SAR) furnished to participants and beneficiaries in addition to the information ordinarily required.

In response to a request from any participant or beneficiary, the plan administrator must furnish, without charge, copies of statements the plan receives from the regulated financial institutions holding or issuing the plan’s “qualifying plan assets” and evidence of any required fidelity bond.

WHAT IS A LIMITED-SCOPE AUDIT?

Limited-scope audits exclude investment values from the scope of the...

Limited-scope audits exclude investment values from the scope of the audit if the assets are held at a regulated financial institution such as a bank, insurance, or trust company that certifies that the value of the assets is complete and accurate pursuant to Department of Labor Reg. 29 CFR 2520.103-5.

Although the audit opinion states that the auditor is unable to express an opinion on the financial statements as a whole (due to the significance of the investment values excluded from the scope of the audit), it also indicates that the information included in the financial statements and supplemental schedules, other than the information certified by the regulated financial institution, was audited in accordance with auditing standards generally accepted in the U.S. and, in the auditor’s opinion, is presented in compliance with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.

This means that all of the following significant audit areas dealing with certain plan operations undergo the same audit procedures that would take place in a full-scope audit:

Eligibility
Employee contributions
Employer contributions
Loan processing
Distributions (hardship, terminating, in-service, corrective, and deemed distributions)
Participant data
Allocation to participant accounts

WHAT OCCURS AT THE COMPLETION OF A RETIREMENT PLAN AUDIT?

Typically, at the completion of the audit, your Retirement Plan Auditor will...

Typically, at the completion of the audit, your Retirement Plan Auditor will issue the company a report that will state an opinion as to the financial state of the retirement plan. It is also likely that the Retirement Plan Auditor will issue a management letter that will detail any problems found during the audit and offer suggestions to strengthen controls and procedures related to the retirement plan’s administration.

At Cook Martin we are committed to achieving the highest quality and most efficient audits possible with our specialized team of accountants. We strive to be a valuable resource to the plan sponsor by providing an emphasis on certain plan operations as the first building block of complete and accurate financial statements.

As a member of the Employee Benefit Plan Audit Quality Center we have access to comprehensive resources that assist us in maintaining the quality of our employee benefit plan audit services. The Center membership also provides us with timely information on a variety of technical, legislative and regulatory subjects that we in turn apply to our employee benefit plan audit services to help ensure compliance with the appropriate standards and changes in regulations.