Federal law requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file an annual return/report (Form 5500 Series).
A quality audit will help protect the assets and the financial integrity of your employee benefit plan and help you determine whether the necessary funds will be available to pay retirement, health, and other promised benefits to your employees. The higher the quality of a plan’s financial statement audit, the more reliable the information used to manage and administer the plan.
A quality audit also will help you carry out your legal responsibility to file a complete and accurate annual return/report for your plan each year. As such, selection of an experienced and reliable auditor is very important.
Recent Department of Labor (DOL) studies of audit quality have identified significant deficiencies in plan audits. Accordingly, the DOL has implemented various enforcement strategies with respect to audit deficiencies. The penalties for such audit failures can be substantial. The DOL can assess penalties on plan sponsors of up to $1,100 a day capped at $50,000 per annual report filing where the required auditor’s report is missing or deficient.
Independent audits of employee benefit plan financial statements are an important accountability mechanism. If your employee benefit plan is required to have an audit, it is the plan administrator’s duty to hire an independent qualified public accountant, and to ensure that the plan has obtained a quality audit in accordance with Employee Retirement Income Security Act of 1974 (ERISA) and U.S. Department of Labor (DOL) requirements. The sponsor of the plan is the plan administrator under the law unless another individual or entity is specifically designated to assume this responsibility.
Plan administrators should use the same care and prudence in hiring a plan auditor that they use when hiring any individual or entity that provides services to the plan. Plan sponsors should make the selection of the plan auditor a high priority and exercise due care during every phase of the auditor selection process.
FMD can help with your Employee Benefit Plan Audit.