The U.S. Department of Labor is increasing its scrutiny of certain retirement plans, and fines are high for non-compliance.
Federal law requires most employers who manage benefit plans with 100 or more participants to complete an annual audit. This results in many small and mid-sized companies searching for a qualified accounting firm to handle the process.
Thus, selecting an auditor is an important decision. For instance, eligible plan participants include active participants, retired or separated participants and deceased participants. The ability to properly recognize all plan participants is an oversight easily missed by small and medium businesses. Plan administrators can be penalized for failing to file an accurate annual return/report each year, so choosing experienced auditors is essential.
Considerations for Choosing an Employee Benefit Plan Auditor
- The Auditor Must be a Licensed or Certified Public Accountant
An auditor engaged in an employee benefit plan audit is required by Federal law to be licensed or certified as a public accountant. An employee benefit plan auditor should not have any financial interests in the plan or its sponsor that would adversely affect their ability to render an unbiased opinion about the financial status of the plan.
It’s often helpful to request references and discuss the auditor’s experience working with other employee benefit plan administrators. While cutting corners may be tempting, failure to uphold the fiduciary responsibilities of administering an employee benefits plan can lead to legal and financial complications.
- The Auditor Should Have Required Experience
The U.S. Department of Labor reports that the most common reason for deficient accountants’ reports is failure to perform tests in areas unique to employee benefit plan audits. When an auditor has appropriate experience, they realize the importance of keeping up to date with changing regulations and recognize that employee benefit plans require special auditing practices. Choosing an auditor with the necessary licensing does not necessarily mean that they have been properly trained on the specifics of an employee benefits plan audit.
Last, you may wish to consider the potential employee benefit Auditor’s involvement in professional associations. An auditor’s affiliation with these associations gives CPAs access to valuable training and resources.
Employee benefits plans are highly regulated by both the Department of Labor and the IRS, so choosing an inexperienced auditor can be detrimental. In addition to employee benefit plan audit experience, an auditor should understand the needs of an organization. This means that an audit should be conducted with minimal disruption to daily operations and that an open line of communication is developed between the auditor and the company.
Choosing the right auditing firm to serve as your employee benefit plan auditor is an important decision. Ernst Wintter & Associates LLP are 401(k) audit specialists who will counsel you on all aspects of your audit. Contact our team at (925) 933-2626 to discuss your business and auditing needs.