Failing to comply with audit standards can result in serious penalties…

An employee benefit plan audit is an audit of the plan’s financial statements.  It is required by the United States Department of Labor (DOL).  An employee benefit plan audit also highlights opportunities for improvement within plan operations, efficiencies, controls and compliance with IRS and DOL regulations.

The Employee Retirement Income Security Act of 1974 (ERISA) requires employee benefit plans with 100 or more participants to complete an annual employee benefit plan audit.  An “80-120 rule” exception is available for plans that qualify.

Generally, the EBP audit is required to be performed annually, as long as the number of participants is 100 or more as of the beginning of the plan year.

The employee benefit plan audit is due seven months after the plan year-end and can be extended for an additional two-and-a-half months.  This is 7/31 with an extension to 10/15 for calendar year plans.

In an effort to complete the audit by the deadline, it's important to allow approximately two to three months for the process, start to finish.

Serious and severe penalties can be assessed on companies for failing to perform or hire an independent CPA firm to perform this mandatory audit.  Late filing IRS and DOL penalties accumulate daily and can become extremely large.

•  Contributions to the plans from the employer and from employees
• Distributions to employees and/or retirees
• Participant loans, if permitted by the plan
• Expenses paid by the plans
• Plan investments and income
• Participant data used to determine eligibility and vesting of benefits
• Tax regulation compliance and plan qualification concerns
• Related party transactions

While avoiding penalties is the primary driver, an audit can also help to identify efficiencies that can make plan management easier.  An audit can verify that contributions and distributions are properly processed and/or corrected and ensure that all participant accounts are complete and accurate.

A Certified Public Accounting (CPA) firm must perform the annual employee benefit plan audit.  Due to the level of complexity and in accordance with Internal Revenue Code (IRS) and DOL standards, firms must receive special training and designation to perform these compliance and regulatory-heavy audits.

First, you should ensure that the firm has the appropriate Certified Public Accountant (CPA) designation and is independent from the plan and the plan sponsor.  You should also verify that the firm has technical knowledge and experience with the complex nature and regulations impacting employee benefit plan audits.  Ensuring that your auditor provides quality audits that comply with ERISA and DOL standards is crucial to your investment.

Skibbie CPA PC. specializes in employee benefit plan audits.  We regularly invest in training and development to ensure our team is well-versed in any new or changing rules impacting employee benefit plans.  We perform many of these highly complex and regulatory-heavy audits each year.