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Providing your employees with benefits, while positive for both parties, can be a complex and tedious process to manage. As your company grows, this process doesn't become any less complicated. In general, once the number of participants in an employee benefit plan (EBP) reaches 100 or more, you are required by federal law to ensure that the plan is audited. If you're new to this, or even if you're not, the employee benefit plan audit process can be difficult to navigate.
At Delap, we have a whole team of EBP auditors who love what they do. In an effort to make the audit process less intimidating, we've developed some frequently asked questions, and interviewed our team members to help bring you clarity in understanding employee benefit plan audits.
In addition to satisfying regulatory requirements, an employee benefit plan audit can provide you with peace of mind regarding the plan's assets, and help to assure your employees that their interests are being looked after. Your audit will also provide you with information surrounding whether your plan can actually pay out to employees the promised retirement or health benefits when they are due.
The audit typically addresses the following areas of your EBP:
You may be wondering: How do I know if I need an EBP audit? As mentioned above, after the number of participants reaches 100 or more, the plan is generally required by federal law to have an audit.
As part of the obligation to file an annual return/report (Form 5500), your plan administrator, with assistance from the auditors, if needed, should determine the nature of the audit to be performed according to the U.S. Department of Labor's (DOL's) Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (ERISA).
In many cases, audit procedures related to plan investments may be limited, which can help reduce the cost of the audit.
*In searching for a firm to perform your employee benefit plan audit, it's important to consider the following:
Generally, the EBP audit is required to be performed annually, as long as the number of participants is 100 or more as of the beginning of the plan year.
Despite the time and resources spent on the EBP audit, your company should realize the benefits of a more efficiently and effectively managed plan. An audit of your plan may even help you save money, by cutting unnecessary costs or identifying costly plan compliance issues.
In an effort to complete the audit by the deadline, it's important to allow at least two to three months for the process, start to finish. Be keenly aware of your deadline and timetable, and take necessary steps to plan ahead to reach your goal.
Below is a suggested sequence of steps to take once you find out your deadline:
Choosing the right firm to take you through the complex EBP audit process can make this part of your life much easier. Our dedicated employee benefit plan team at Delap has extensive experience auditing a wide variety of employee benefit plans. We assist in interpreting Plan Documents, advising plan administrators, and helping implement best practices for plan operations. We would love to help you through any questions you might have regarding your plan.
Fidelity: Understanding Form 5500
*United States Department of Labor (1996). Selecting an auditor for your employee benefit plan.