Employee Benefit Plan (EBP) Audits
If you have an employee benefit plan with 100 or more participants, generally you are required by the Employee Retirement Income Security Act of 1974 (ERISA) to have an audit of the plan conducted each year. This audit helps protect against fraud and abuse ensuring the plan can pay benefits. When conducted properly, the audit can also help you better manage the benefit plan.
To ensure compliance with federal regulations and to help protect against the risk of deficiencies, it is important to have a quality audit conducted each year of your plan.
Types of Benefit Plan Audits
When certain criteria are met, ERISA allows for limited scope audits of benefit plans. How do you know which you need? Let’s explore both options.
In a full scope audit, the auditor’s audit and report on the plan’s financial statements, including all assets, liabilities, and financial activities. The audit includes testing of all aspects of the benefit plan.
When certain criteria are met, the client can limit the scope of testing of investment information in the financial statements. This election must include a certification from a qualified entity over the accuracy and completeness of the plan’s investment information. In a limited scope engagement, the auditor does not audit the certified investment information. However, testing over others aspects of the plan is still performed. In a limited scope engagement, the auditor does not provide an opinion on the plan. It is important to note that limited scope benefit plan audits are not acceptable for SEC purposes.
Benefit plan audits require specialized knowledge to conduct. Our team of professionals stays current on ERISA requirements and conducts quality benefit plan audits. During a benefit plan audit, we consider the following areas:
- Employee and employer contributions
- Benefit payments
- Plan investments and investment income
- Participant data and allocations
- Liabilities and plan obligations
- Participant loans
- Administrative expenses
Common Deficiencies
Recent studies by the Department of Labor (DOL) have shown that audit deficiencies occur at an unacceptably high rate. As such, the DOL has increased its enforcement strategies. The DOL can assess penalties up to $1,000 a day (capped at $50,000) per annual report filing where the audit report is missing or deficient.
Some of the common deficiencies identified by the DOL include a failure to completely and adequately test participant data, investments, contribution, distributions, and related parties.
Due to the high risk involved, it is important to select an auditor that truly understands benefit plans and is familiar with plan practices and operations. The auditors at CK&Co. receive continuing professional development specific to employee benefit plans to ensure they stay current on changes and requirements.
We Can Help
CK&Co. conducts quality benefit plan audits to ensure compliance with federal requirements and partners with you so that you can use the results of the audit to manage the plan more effectively and efficiently.
Our team of professionals stays up-to-date on benefit plan matters and we are a member of the AICPA’s Employee Benefit Plan Audit Quality Center. This is a national community of accounting firms committed to quality benefit plan audits. Through this community, we have access to a wealth of information that assists us in providing quality audits and allows us to better serve our clients.
Meet Peter Maddalena
A proper audit can help you make better decisions about your benefits, while protecting against fraud and abuse.