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 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 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 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 scope audit.
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 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 made a commitment to adhere to significant quality and continuing education standards that ensure you will receive a high-quality audit.
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 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 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?
WHY DOES A RETIREMENT PLAN AUDITOR NEED TO BE INDEPENDENT?
WHY DO I NEED TO CHECK THE AUDITOR'S LICENSES AND REFERENCES?
WHY DO I HAVE TO SIGN AN ENGAGEMENT LETTER FOR OUR RETIREMENT PLAN AUDIT?
HOW CAN RETIREMENT PLAN AUDITS ADD VALUE?
WHEN IS AN AUDIT OF THE RETIREMENT PLAN FINANCIAL STATEMENTS REQUIRED?
DO I NEED A 401K AUDIT?
WHAT IS A LARGE PLAN?
HOW DO YOU TELL IF YOU HAVE OVER 100 ELIGIBLE PARTICIPANTS?
WHAT IS THE 80-120 RULE?
WHAT DOCUMENTATION DO I NEED TO BE READY FOR AN EMPLOYEE BENEFIT PLAN AUDIT?
UNDER WHAT CONDITIONS CAN SMALL PLANS WAIVE THE REQUIREMENT FOR A BENEFIT PLAN AUDIT?
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?
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:
- 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?
At CMP 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.
ERISA Audit Advisors: