Preparing Census Data for a Smooth Employee Benefit Plan Audit
Published on by Jessica Doremus in Benefit Plan Audits
- Accurate census data sets the foundation for a smooth EBP audit by providing the employee information auditors need for eligibility and compliance testing.
- Your census should include all employees who received compensation during the year, not just those who participated in the plan.
- Reconcile census totals before submitting your file by comparing deferrals, contributions, and compensation with W-2 information and payroll records.
- Starting the census process early can prevent audit delays by giving you time to identify missing information, investigate discrepancies, and make necessary corrections.
With the year already well underway, plan sponsors and HR professionals know what that means: it’s time to prepare for your annual employee benefit plan (EBP) audit. While there are many moving pieces involved in a successful audit, few steps are as foundational, or as frequently overlooked, as compiling and reconciling your census data.
Getting your census right early in the process sets the tone for everything that follows. It helps auditors identify who is eligible to participate in the plan, provides the population needed for compliance testing, and can significantly reduce questions and follow-ups during fieldwork.
What’s a census file?
A census is a report, typically generated from your payroll system, that captures relevant employee data for a specific period. For calendar year-end plans, that means paycheck dates from January 1 through December 31. For fiscal year-end plans, the period shifts accordingly. For example, a June year-end plan would generally cover July 1 through June 30.
The census provides auditors with a complete population of the plan sponsor’s employees, regardless of whether each employee actually participated in the plan during the year. Common data fields include:
- Employee name and identification number
- Date of birth, hire, and termination, if applicable
- Employment status
- Hours of service, if applicable
- 401(k) eligibility status
- Total gross compensation
- Pre-tax and Roth employee deferrals
- Employer match or contribution amounts
Depending on the specific provisions of your plan document, additional data may be required. For example, if your plan excludes bonuses from the definition of eligible compensation, including a separate bonus column in your census makes it easier for auditors to verify that the correct compensation figures were used in testing.
Reconcile before you submit
The best way to confirm your census is complete and accurate is to reconcile key data field totals against government-filed forms. For calendar year-end plans, Form W-3, the W-2 total page, is an important starting point.
Employee deferrals
Total employee deferrals on your census should match the amount reported in Box 12D of your W-2 totals page.
Contributions schedule
Total employee deferrals and employer deferrals, if applicable, should also agree with your plan’s schedule of contributions report. This report is used to determine whether contributions were remitted to the plan on time.
Gross compensation
Because gross wages don’t appear in a single W-2 box, run a year-to-date payroll report and compare wages paid through payroll with the gross compensation listed on the census. You can also add Box 1 wages by employee to your census and compare the total with the W-2 page. For clarity, consider including an overall reconciliation from gross wages to Box 1 at the bottom of the census, noting adjustments for items such as group-term life insurance, 401(k) deferrals, or cafeteria plan contributions.
If your numbers don’t reconcile, look for year-end corrections or amended filings, such as Form W-2c. As a best practice, wait until W-2s are finalized before completing your census to ensure all year-end adjustments are captured.
A complete census means everyone
One common misconception is that the census only needs to include employees who participated in the plan. In reality, every employee who received compensation during the year should generally be included.
Before sending your census to your auditors, confirm that it includes the applicable employee demographic information, compensation, eligibility status, deferrals, employer contributions, and hours of service required under your plan.
Gross compensation totals should also be reconciled to payroll records. Any differences between reports will likely need to be investigated during the audit, so resolving them ahead of time can help keep the process moving.
Common pitfalls to avoid
Even small data issues can create additional work once an audit is underway. A few common trouble spots are worth watching for:
- Missing or outdated employee data: Incomplete records can delay testing and push back the entire audit timeline.
- Payroll and census discrepancies: Differences in reported compensation, Roth contributions, or deferral totals require time and effort to investigate. Reconciling early saves everyone headaches later.
- Missing employer contributions: Employer contribution amounts by participant are needed for ACP testing. Leaving this out can stall the process.
- Late submissions: Submitting your census late can impact your ability to meet IRS and DOL deadlines for compliance testing and Form 5500 filing.
Start early and finish strong
Preparing your census early gives you time to review the data, resolve discrepancies, and get ahead of compliance testing deadlines. A clean, reconciled census gives your auditors a strong starting point, reduces follow-up questions during fieldwork, and helps keep the audit on schedule.
Our team of top employee benefit plan pros can help you prepare for your audit, identify potential issues, and make sure your census data is complete and ready for testing. If you have questions about census preparation or need support with an upcoming plan audit, contact us today for a free consultation. As always, we’re here to help.
Additional resources
Looking for more ways to prepare for your next employee benefit plan audit? Our employee benefit plan audit video series covers key topics on-demand, while our latest 401(k) plan management report provides insights into how organizations are managing their plans. For answers to common questions about the audit process, you can check out our employee benefit plan audit FAQ page.
