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Preparing For an Employee Benefit Plan Audit

Published on by Joe Conover in Benefit Plan Audits

Preparing For an Employee Benefit Plan Audit

For many growing businesses, there may come a time for an when an employee benefit plan (EBP) audit is mandated by the Department of Labor. If you’re not prepared for the additional scrutiny, especially in light of ever-changing rules and procedures governing qualified employee benefit plans, it can cost valuable time and resources during the audit – and potentially fines if the plan is non-compliant. Knowing how to plan for the audit and what the auditors will be looking for is key. To help our clients, prospects and others enhance their employee benefit plan audit process, Barnes Dennig has provided some tips below.

Who Needs an EBP Audit?

Retirement plans that may require an audit include 401(k), 403(b), defined contribution, defined benefit, health and welfare and Employee Stock Ownership (ESOP) plans. An EBP audit by an independent CPA firm is generally required if the company has more than 100 eligible participants on the first day of the plan year.

Eligible participants include those who are currently employed by the plan sponsor (whether they participate or not), no longer employed by the plan sponsor (i.e. retired or separated from the company) but still have assets in the plan or those who are deceased but their beneficiaries have assets in the plan or are receiving/entitled to receive benefits.

Key Audit Preparation Tips

As your EBP audit approaches, consider the following tips that can make the process run more smoothly:

  • Familiarize yourself with the details of your plan. Understanding all the provisions and adoption rules in the plan will help you ensure compliance throughout the year and worry less about the examination. You should also know and be prepared to talk about plan changes, including amendments, any new investments, change in trustees or third-party administrators or new eligibility requirements that open the plan up to new employee groups.
  • Know what will be asked of you during the audit. There are a number of steps that can be completed well before your audit starts to help maintain efficiencies during the process. For instance, review of internal controls and financial statement preparation can be performed before the start of fieldwork. Also, you should review the timeliness of your employee deferral contribution remittances before your audit. You can request a guide or checklist from your auditor that specifies the data they will need and in what format.
  • Gather documents ahead of time. Along with ensuring compliance of the plan’s administration, audits typically examine a host of different records. Gathering information and preparing for questions the auditor may ask about the plan ahead of time can help you avoid delays and unnecessary stress. The auditor’s list may include:
    • Executed plan documents and amendments (including adoption agreements)
    • Spreadsheet templates to summarize plan activity
    • Employee census report and payroll records
    • Employer and employee contributions
    • Current IRS determination or opinion letter
    • Investment and reinvestment results
    • Distribution of benefits and participant loans
    • Payment of expenses
    • Administrative committee and/or board minutes that pertain to the plan
    • Trust and recordkeeping agreements with the plan custodian and record keeper
    • Activity-level internal control narratives
    • Proof of the plan’s ERISA fiduciary bond coverage
    • Copies of prior 5500 filings
    • Other significant agreements or correspondence related to the plan
  • Keep your team on track. Meet regularly with all those involved, including service providers, plan custodians, third-party administrators and internal staff. In the initial meeting, make sure everyone knows their role, understands what they will be responsible for and establish a timeline. Follow-up meetings can be used to keep the timeline moving and talk through any outstanding requirements or questions.
  • Learn from the process. After the final report has been issued, meet with your employee benefit plan team to debrief about what went well, what could be improved upon and what changes would help the process go more smoothly next year.

Contact Us

Whether your employee benefit plan is about to be audited for the first time or you have years of audits under your belt, there are always ways to improve the process. The best way to ready your firm is to prepare throughout the year by keeping detailed records and conducting self-audits at regular intervals. If you would like more information or if you are seeking an experienced team that specializes in EBP audits, Barnes Dennig can help. For additional information, please call 513-241-8313 or click here to contact us. We look forward to speaking with you soon.


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