Better Serve Your Employees with an Employee Benefit Plan Audit
Federal law requires businesses with 100 or more participants in employee benefit plans to have an employee benefit plan audit on a yearly basis, but even smaller companies can greatly benefit from this professional service.
Although every licensed CPA in Long Beach is capable of providing an audit, it’s best to choose an experienced firm for the job. It’s extremely important to make sure that your benefit plans are able to pay retirement, health, and other promised benefits when they’re needed. Digging deep into your files is necessary in order to complete an accurate report.
There are many areas where an employee benefit plan audit can be effective, which include:
- 401(k) plans
- 403(b) plans
- Health and welfare plans
- Retirement plans
- Examination of plan operations
- Review of compliance
- Internal control reviews
- And more
A quality audit may also include testing demographic data, hardship withdrawals, and remitting employee contributions, which some inexperienced CPAs might overlook.
Qualified financial advice and improvement suggestions
Unlike agreed upon procedures, which focus on providing you with facts so you can come to your own conclusions, a quality employee benefit plan audit should come with professional advice. When the report is complete, the corporate tax accountant team working on your report will provide you with a professional opinion on your plan’s financial statements. Your report will include any problems, if they were discovered, and you may also learn ways to improve internal controls and plan operations.
The conclusion of the audit is a great time to ask questions, if you have any. There are also a number of areas that a professional CPA should address, and data in these areas should be clear. Some questions you might want to ask yourself or your CPA include:
- Are plan assets in the audit fairly valued?
- Are plan obligations clear?
- Are contributions to the plan received in a timely manner?
- Do benefit payments adhere to the plan terms?
- Were any issues identified that could influence the plan’s tax status?
- Were prohibited transactions identified?
You could be putting the future of your company in danger if you don’t choose the right team for your employee benefit plan audit and tax planning. Many offices claim they can conduct a thorough audit, but if they don’t conduct them often, they are more likely to provide you with a deficient report.
It’s important to choose a professional team with expertise in a wide variety of areas, which includes the highly complex area of employee benefit plan audits.
Contact us today to learn more about how an employee benefit plan audit can ensure that your business and your employees are prepared for the future.
Employee benefit plan audit FAQ
How do I know if I need an audit?
In general, if you have over 100 employees, you’re required by law to conduct an audit. As a large plan provider, you will be required to file Schedule H to form 5500, which includes having the plan audited. However, there is at least one exception.
If you have between 80 and 120 participants at the beginning of the plan year, you may instead be able to file the same way you did the previous year. Under this rule, you don’t necessarily have to have an audit.
In some cases, having even fewer people on your plan may still require you to have an audit, depending on what programs and regulations you follow. In addition, having an audit done might be a good idea anyway, even if you don’t legally need one. It’s always a good idea to speak with a professional to decide if an audit is right for your business.
What is a limited scope audit?
There are a few different kinds of audits to choose from, and one of those is a limited scope audit. This type of audit is an option if you have plans with assets that are held by a bank or similar financial institution, or an insurance company that is regulated and supervised by a state or federal agency that regularly provides periodic examinations of the plan.
With a limited scope audit, the responsibilities of the auditor are limited. The auditor is responsible for:
- Reading the certification
- Identifying whether your business is a qualifying institution under DOL regulations
- Comparing certified investment information to financial information in the plan’s financial statements and disclosures
- Performing procedures to determine that contributions have been received and benefit payments have been made
- Assessing financial statement disclosures for conformity with GAAP and compliance with DOL rules and regulations
What is a fiduciary?
Many of the questions surrounding employee benefit plan audits relate to the terminology involved. The term ‘fiduciary’ is one of the most confusing.
A fiduciary is someone who has authority over plan management or plan assets, responsibility for the administration of a plan, or someone who provides investment advice to a plan for compensation. A few examples are plan trustees, plan administrators, and investment committee members. In short, a fiduciary runs the plan solely in the interest of its participants and beneficiaries for the exclusive purpose of providing benefits and paying plan expenses.