Employee Benefit Plan Audits

 

The United States Department of Labor (“DOL”) generally requires employee benefit plans (“EBP”) with 100 or more participants to have an audit as part of their annual Form 5500 filing.

Employee benefit plan audits are unique in several ways. Most importantly, employee benefit plan audits should do more than support financial statements, EBP plan audits should also evaluate plan operations. These unique attributes of employee benefit plan inquiries require an intimate knowledge of the specific plan being audited, the Employee Retirement Security Act of 1974 (“ERISA”), the disclosure and disclosure requirements of the Department of Labor of the United States, in addition to generally accepted accounting principles and the AICPA audit rules

The employee benefit plan accounts represent an area of ​​significant opportunity for auditors. In an article published in April 2020, Accounting Today reported that there are currently more than 83,000 audits of employee benefit plans conducted by approximately 7,300 firms. However, not just any auditor or accounting firm can handle employee benefit plan audits. It takes special training to perform the audit correctly and in accordance with the Internal Revenue Code (IRC) standards.

James Liggett CPA has extensive technical knowledge to help companies address their Employee Benefit Plan (EBP). As an experienced Certified Public Accountant, James offers audits through a simplified process, individually tailored to your benefit plans and more specifically to your needs.

In response to questions that plan administrators should ask an auditor about their work, DOL's Employee Benefits Security Administration (“EBSA”) observed that EBP audits are often deficient because auditors fail to test exclusive areas of employee benefit plans including:

The plan assets covered by the audit have been well valued

In general, fair value is the appropriate measure of plan assets. However, profit-sensitive assets must be valued at contract value. In addition, special attention should be paid to the valuation of certain securities, such as investments in real estate investment trusts and junk bonds, for which there are no readily available market prices.

Whether contributions to the plan were received in a timely manner

The DOL requires employees to submit employee contributions as soon as they can be separated from the employers' assets, but in no event later than the 15th business day of the month immediately following the month in which the employer withheld or received the contribution. Many plan administrators and auditors mistakenly believe that this provision creates a 15-day safe harbor for sending employee contributions. Late submission of employee contribution is the most common example of a prohibited transaction as defined by the DOL.

James Liggett CPA is known for conducting and delivering top-quality audits on employee benefit plans. As a partner of Liggett & Webb P.A, he understands that an effective audit involves much more than meeting basic requirements.