Managing Employee Benefit Plans and Audits

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One of the administrative requirements of Employee Benefit Plans (EBP) that is not widely discussed is the necessity of annual audits for plans with more than 100 participants (as a general rule). Though mandatory, these audits can actually produce important benefits for the plan and its sponsor or administrator. The audits are not intrusive, but ideal interaction between clients and auditors can result in a better understanding of the operating effectiveness of the plan, stronger controls, and education about the financial picture of the plan. EBP auditors are not necessarily “big city” firms, and Vesta is a great example of a local firm with a competent and experienced staff conducting thorough audits of EBPs.

EBP audits require that the auditor be independent of the plan. For example, a firm that maintains financial records for the plan will not meet the independence test for audit purposes. The auditor’s independence is essential because it enables them to approach the audit with the “professional skepticism” required by the American Institute of Certified Public Accountants (AICPA) and Department of Labor (DOL) to assess the EBP objectively.

In addition to assuring that your Form 5500 filing is in compliance, on time, and avoids rejection, let’s look at some of the other potential benefits independent EBP audits provide:

  • Information is provided to give transparency to participants, management, DOL, and others to assess the plan’s present and future ability to pay benefits.
  • Accountability is provided to administrators for performing the duties required to maintain viable EBPs.
  • Staff education and training related to processes and procedures specific to EBPs.
  • Recommendations for stronger controls and/or operational effectiveness.

When considering your options in selecting an EBP auditor, look at the assets that Vesta’s experts provide as an example of the standard you should expect from those competent in this field:

  • Knowledge of GAAP, DOL, IRS, and ERISA requirements
  •  Significant years of experience in the industry
  • Subscription to and use of current tools and resources to ensure audit quality
  • Access to resources for outside consultation when unusual issues arise

For more information to help you understand your options and requirements for auditing and reporting related to your EBPs, please reach out to the Vesta experts at any one of our Wisconsin offices.

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