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Employee Benefit Plan Audit Checklist

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HR Audit Checklist [Complete Guide]

Furthermore, the Firms service-focused approach reduces the disruption to an organizations plan operations. Our EBP professionals also assist plan trustees in their fiduciary responsibilities, with a focus on providing valuable planning information and serving as advisors on financial issues.

Berdon is a member of the International Foundation of Employee Benefit Plans and the American Institute of Certified Public Accountants Employee Benefit Plan Audit Quality Center . As a member of IFEBP and the EBPAQC, Berdon professionals have contributed to the development of accounting rules for employee benefit funds.

Us Department Of Labor Representative

To assess the level of customer service being provided by the DOL representative and to identify areas where improvement is needed, IQPA firms were asked to rate the following:

  • The DOL representative thoroughly explained the purpose and scope of the review of the firm’s audit workpapers.
  • The overall score for this element was 4.63.
  • The DOL representative conducted an exit conference wherein the results of the review of the firm’s workpapers were adequately discussed.
  • The overall score for this element was 4.62.
  • Where deficiencies were identified, the DOL representative adequately discussed corrective actions to be taken to bring the plan’s filing into compliance.
  • The overall score for this element was 4.63.
  • Overall, we believe these scores demonstrate an excellent level of customer service.

    Preparing For Your Employee Benefit Audit

    From the Affordable Care Act , to the Employee Retirement Income Security Act of 1974 , and beyond, there is a complicated web of rules and regulations that apply to your employee benefit plans. Making sense of all of these laws, crafting the perfect benefit plans, and ensuring compliance can seem daunting to even the most experienced Human Resources or Finance professional.

    If youre preparing for an employee benefit audit, its normal for concerns about compliance to be heightened throughout your organization. In this post, the employee benefit plan audit experts at DHJJ cover the basics of what you need to know about the process. Read on to learn more.

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    A List Of The Plans Service Providers

    If anyone is involved with the operation of the plan, you should have an up-to-date listing of each party working with the plan and copies of service agreements. Service providers that work with your plan may include trustees, custodians, third-party administrators, insurance companies, investment advisors, etc. Its best practice to keep this list updated with your key contacts and their contact information.

    Best practices for record retention

    Its part of the plan administrators fiduciary responsibilities to retain and maintain documents that support all plan activities, protect participant information, and comply with legal requirements.

    Files may be paper or electronic. Saved in a filing cabinet, digitally, or via an online portal. Records may be saved by several parties. Operational documents may be maintained by the plan sponsor. Documents specific to individual participants may be saved by the plan sponsor or service providers. Others may be managed by your organization in various departments or by your service providers.

    Make sure you keep documents for as long as a participant has a balance in the plan. Many plan administrators overlook this rule.

    This practice will also help you clarify who saves which files and reduce confusion or miscommunication. You dont want to find yourself in a position where youre unable to fulfill an audit request.

    More tips for success

    Employee Benefit Plan Audits: A Comprehensive Guide To Understanding Requirements And Navigating The Process


    The Employee Retirement Income Security Act is a federal law that applies to most private employers and establishes standards for health, retirement and other welfare benefit plans in order to protect both employees and employers. ERISA applies to any private entity that offers benefit plans that fall under their scope of authority. This legislation requires that employers comply with specific standards, one of which includes an employee benefit plan audit requirement. Enter: employee benefit plan audits.

    An audit of an employee benefit plan involves the examination of financial statements provided by a third party to the DOL, plan management and plan participants. Going through an EBP audit can be a daunting process, especially if youre going through the process for the first time.

    Chapter 1:

    To fully grasp the importance of an EBP audit, its wise to examine what EBP audits entail and the ultimate objective of these audits.

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    How To Prepare For Your Employee Benefit Plan Audit

    After you hire an independent CPA firm to audit your companys retirement plan, whats next on the to-do list? Can you walk away and let the auditor take it from there?

    No. Before the plan financial statement audit begins, you need to make sure you have access to plan records. This is one of many responsibilities of a plan administrator maintaining the financial books and records of the plan and filing an accurate annual return. Plus, keeping up-to-date, easily accessible records can help the audit go smoothly.

    If you dont know how to prepare for a benefit plan audit, its ok. Weve put together a list of the records you should be able to access and share as the audit team requests them. This list isnt all-inclusive, but it does cover the basics.

    Sufficiency Of Professional Guidance And Training

    In order to assess the sufficiency of professional guidance and training for IQPAs conducting audits of employee benefit plans and to identify areas where such may be lacking, IQPA firms were asked to rate the following:

    • Sufficient professional guidance exists with respect to accounting and reporting for employee benefit plans.
    • The overall score for this element was 3.86.
  • Sufficient training programs exist with respect to accounting and reporting for employee benefit plans.
  • The overall score for this element was 3.58.
  • Sufficient guidance exists with respect to reporting and disclosure requirements pursuant to ERISA’s reporting and disclosure requirements.
  • The overall score for this element was 3.42.
  • In addition, practitioners took the opportunity to provide OCA with the following additional comments and concerns:

    Overall, while the present guidance could be improved and expanded in certain areas, we believe that the above scores demonstrate that sufficient guidance and training is available to practitioners conducting audits of employee benefit plans. However, it is recommended that the DOL continue to work in conjunction with the profession in addressing areas where more specific guidance may be lacking .

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    Documents Required For Employee Benefit Audit

    The first step: hiring an experienced CPA firm that you trust to audit your employee benefit plan. The next step: getting together everything the firm will need to conduct your audit. Below, weve outlined the core materials a professional audit team will need to get started.

    Keep in mind that the following list is not all-encompassing, and your audit team may let you know that they need a bit more information from you. As youre making your way through this list, also remember that if you havent had a great written record retention policy in place, now is a great time to start.

    If you run into issues finding some of the documents or information listed below, dont forget to check with any third-party that you may have contracted with in order to administer or run your plan. Some documents may be held by the plan sponsor or accessible via a third-partys online portal.

    1. Information on your plans participants

    Your audit team will need a few key employee data points, including the basics: your employees names their employee classification the date they were hired and/or fired the date they enrolled in a benefit plan identifier information such as their birthday, social security number, and data regarding their compensation, eligibility, and contributions. These data points are crucial to conducting an accurate audit.

    2. Payroll data

    3. Employee enrollment forms and contribution information

    4. Distribution and loan information

    6. Plan governance and documents

    Employee Benefit Plan Auditing

    2022 CPA Audit Exam-Audit of Employee Benefit Plans by Darius Clark

    For more than 40 years, Berdon has worked with a significant number of companieswith 100 or more employeesand labor unions, to conduct audits of their employee benefit plans, and ensure compliance with regulatory scrutiny under the Employee Retirement Income Security Act, Department of Labor, Health Insurance Portability and Accountability Act, and the Social Security Administration.

    Berdons Employee Benefit Plan Practice has extensive experience in auditing various types of employee benefit plans, including defined benefit and defined contribution, self-insured, retirement, 401, and health and welfare. Additionally, our team introduces innovative methodologies to clients for government regulations compliance, and helps identify opportunities to improve reporting efficiency.

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    What Is Form 5500

    The Form 5500 provides federal agencies with an annual report to use as a framework. Form 5500 includes information about the benefit plans that are offered by employers, as well as the finances and operations of these plans.

    Its one of the most essential documents in ERISAs disclosure and reporting framework, born from the collaboration of these three U.S. government agencies:

    • the Pension Benefit Guaranty Corporation
    • the Internal Revenue Service
    • the Department of Labor

    Learn How To Audit Employee Benefit Plans

    Audits of employee benefit plans differ significantly from audits of other types of entities. These audits are not only subject to peer review but are also subject to inspection by the Department of Labor , so it is important that you conduct them in accordance with generally accepted audit standards and DOL rules and regulations.

    The definitive employee benefit plan audit guide

    PPCs Guide to Audits of Employee Benefit Plans provides comprehensive guidance on the nuances of auditing employee benefit plans and summarizes the DOL and IRS regulations that are relevant to you as an auditor. It also provides the following valuable tools:

    • Audit programs and a disclosure checklist that address defined benefit plans, defined contribution plans, and health and welfare benefit plans
    • Specific procedures for full- and limited-scope audits to make sure you perform only the procedures that are necessary
    • Other audit checklists and letters, such as engagement and management representation letters
    • Multiple illustrative financial statements for each type of plan
    • Numerous illustrative auditors reports for all of your potential reporting issues
    • Guidance on preparing and reporting on DOL required supplemental schedules
    • Procedures for initial audits

    The Guide is authored by internal and external industry experts, and when necessary, our authors consult with representatives of the DOL to ensure our tools address their requirements.

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    Employee Benefit Plan Audit Quality Center

    To help CPAs meet the challenges of performing quality audits in this unique and complex area, the AICPA has established the Employee Benefit Plan Audit Quality Center, a firm-based voluntary membership center for firms that audit employee benefit plans.

    This non-authoritative document was prepared by the EBPAQC to help plan auditors understand cybersecurity risk in employee benefit plans, and to discuss cybersecurity risk, responsibilities, preparedness, and response with plan clients.

    Reminder: Mandatory Participation in the Designated Partner Audit Planning Webinar Center membership requires all EBPAQC member firms to have their audit partner designated with firm-wide responsibility for the quality of the firm’s ERISA employee benefit audit practice participate in the annual EBPAQC Designated Partner Audit Planning webinar.

    Employee Benefit Plan Audit Checklist

    HR Audit Checklist: 8 Steps to Conduct HR Audit 2022 (2022)

    The audit of employee benefit plans will look slightly different for each company being audited. However, there are general guidelines for the process that do tend to stay the same.

    As we mentioned, the first step is getting an audit team together. Aside from your CPA firm and your organizations HR and Finance Departments, you may also need to involve legal counsel, particularly if your employee benefit plan is complex.

    The team will analyze your organizations compliance with federal laws, such as those mandated by the DOL and the IRS, as well as state requirements specific to your companys location and operations area.

    The audit team will also examine the following:

    • Participant information
    • The liabilities associated with and obligations required by the plan
    • The accuracy of the Form 5500

    While this may seem like an intimidating and arduous process, hiring a great audit team to guide you through will help ensure that your organization is in good hands and nothing slips through the cracks.

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    Additional Improvements Are Needed To Ensure Compliance With Regulatory Reporting And Disclosure Requirements

    In addition to adhering to GAAS, the report of the IQPA must also meet certain ERISA reporting and disclosure requirements. ERISA section 103 and regulations thereunder at 29 CFR 2520.103-1 set forth these requirements. These additional reporting and disclosure requirements were enacted to ensure that the federal government and plan participants and beneficiaries were being provided with information that may alert them to instances which could adversely impact the operation of the plan and/or its ability to pay plan benefits when due .

    As previously stated, our total sample consisted of 276 plans. We assessed 267 IQPA reports against their compliance with ERISA’s reporting and disclosure requirements. The 267 IQPA reports assessed include those five audits that were excluded from our assessment against compliance with professional accounting and auditing standards because the audit was of the wrong entity . Of the 267 audits reviewed, 88 IQPA reports failed to comply with one or more of ERISA’s reporting and disclosure requirements.

    Melissa Missy Herbert Cpa

    Missy Herbert is a Member in the Firm’s Audit Division. She has more than 20 years of employee benefit plan audit and consulting experience. Missy offers public and private companies plan audit knowledge combined with a strong ERISA and plan operations background. During her career, Missy has performed plan audits and consulting for over 850 different plans with plan bases ranging from 120-50,000 participants and assets from $500 thousand to $14 billion. She also has extensive experience auditing plans that are required to file an annual 11-K with the Securities and Exchange Commission . Recently, Missy authored an audit guide on how to audit employee benefit plans, entitled “Knowledge-based Audits of Employee Benefit Plans”. Speaking engagements for Missy include the AICPA Employee Benefit Plan Annual Conference, Georgia Society Employee Benefit Plan Annual Conference, UBS Fiduciary Forum, and several regional state society employee benefit plan training conferences. Missy and her family reside in Atlanta…. Read More

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    Form 5500 And Related Instructions

    To enable DOL to determine whether the failure rate to comply with ERISA’s reporting and disclosure requirements may be attributable to the complexity in completing the Form 5500, OCA asked IQPAs to assess whether the Form 5500 and related Instructions are clear and understandable. The overall score for this element was 2.90.

    In addition, IQPAs provided OCA with the following additional comments and concerns:

    Based upon the above, we believe that the Form 5500 and related Instructions could be improved. At present, DOL is considering simplifying the Form 5500 for ERISA reporting and disclosure purposes and, as such, some of the comments and concerns expressed by IQPAs would be resolved.

    Why Did Some Audits Comply And Others Not Comply With Established Professional Standards

    Understand Employee Benefit Plan Audits and Prepare Your Organization for the Changes Ahead

    Of the 262 audit engagements selected for on-site workpaper reviews, 212 were considered to comply with GAAS. For these audits, we concluded that the audit was conducted within the framework of GAAS, meaning that:

    the audit work was adequately planned and supervised

    • the audit field work was properly performed and
    • the results of the audit were properly communicated in compliance with existing professional standards.

    For 50 of the audits in our sample, we concluded they were not conducted within the framework created by GAAS. In most cases, the GAAS deficiency related to a failure to perform any audit work whatsoever in a relevant audit area.

    We analyzed these 262 audits to determine which attributes and factors contributed to the engagements that were performed in accordance with professional auditing standards, and those that were not. The common attributes and factors affecting audit quality included:

    Size of the IQPA Firm Contributed to the Quality of Audit Engagement

    Our review provided some valuable insights into the correlation between the size of an IQPA and the likelihood of one of their audits containing audit deficiencies. Most notably, in our sample, firms with 20 or less employees:

    Adequate Technical Training and Knowledge

    Awareness of Uniqueness of Employee Benefit Plan Audits

    Quality Review and Internal Process Controls

    In our sample, large firms tended to have very formal processes for internally reviewing audit work. These processes included:

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    Hipaa Security Policies And Practices

    Plans that store, receive or transmit PHI are required to establish written policies and procedures regarding the maintenance and transmission of PHI. Business Associates agreements may require amending fully insured plans excluded.

    Notice of Special Enrollment Rights

    Administrators are to notify eligible participants of exclusive enrollment rights when offered the opportunity to enroll in group health insurance, including a description of special enrollment events and enrollment procedures .

    Medicare Part D Notice of Creditable Coverage

    The Medicare Part D requirements apply to group health plan sponsors that provide prescription drug coverage to individuals who are eligible for Medicare Part D coverage. Medicare Part D requires a disclosure notice to Medicare Part D qualified individuals who are covered by, or apply for, prescription drug coverage under the employers health plan. Present before the Medicare Part D Annual Coordinated Election Period . Because its challenging to know if the employee or their dependents quality, its recommended you provide this Notice to the employee and dependents annually.

    Employers must disclose to the Centers for Medicare and Medicaid Services whether the plans coverage is creditable on an annual basis and upon any change that affects the plans respectable coverage status.

    Phase One: Preparation Of Your Ebp Audit Requirements

    Proper preparation of the support that is required for your EBP audit will make the audit itself go more smoothly and streamline both the fieldwork and completion phases.

    Below, weve provided a checklist of important documentation and statements needed to effectively complete the audit. Many of these items can be provided by the third-party administrator and/or the plans investment custodian.

    In addition, the company itself must provide copies of reports from both payroll and human resources that relate to the plan participants, such as those showing employer contributions, process narratives and participant loan details and support.

    EBP Audit Requirements Checklist

  • Support for a sample of participant benefit payments
  • Process narratives for hiring and paying plan professionals
  • A draft of Form 5500
  • All documents related to service provider fees, including fee schedules and compensation paid to professionals by the plan
  • Contracts with fiduciaries and other service providers, including details and dates for services provided as agreed upon
  • Any ERISA compliance policies or procedures adopted by the plan or sponsor
  • All documents related to plan investment performance
  • All documents related to administrative expenses related to the plan
  • Documents showing the names and service times of board members and officers of the plan sponsor
  • Documents showing timeliness of employer contributions and support for authorization and payment of participant loans
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