Employee Benefit Plan Audits – How They Work

Businesses who provide an “employee benefit plan” can use this feature as a way to attract qualified candidates, reward current employees for their work and dedication, and provide certain benefits to the business owners.

 

So what exactly is an employee benefit plan?

 

The most common employee benefit plan offers a 401(k) option for participants and a profit-sharing plan. However, there can be a great deal of other benefits that can include stock options and purchases, benefits such as medical and disability, and employee loans.

 

What you offer in an employee benefit plan can be determined by the business owners, investors, and other top-level managers. Of course, the plan should be reviewed by a CPA and possibly a financial attorney to make sure it’s been properly established and is legally sound.

 

What does an audit do?

 

Like anything else, rules and regulations change over the course of time, and an employee benefit plan is no different. While changes in legislation and rulings can affect your plan, the major reason for an audit occurs when there are 100 eligible participants.

 

An audit, which has to be conducted by an independent certified public accountant, provides credibility that your plan has the funds available to pay out the benefits to participants when the funds are due, funds are being invested on time, and that the plan is overall being run efficiently, accurately, and in the best interest of the employees..

 

Depending upon several factors, which can include the size of your company, where it is located, and your field of business, participants in the audit can include:

 

• Human resources
• Financial department
• Accounting department
• An actuary
• Third party administrator
• Employee Retirement Security Act of 1974 (ERISA) legal counsel
• Investment trustees and administrators

 

What does an audit include?

 

According to the American Institute of Certified Public Accountants, the audit should cover areas such as benefit payments, employer and employee contributions, administrative expenses and the data of the participants.

 

Those involved in the audit will take a deep dive into various areas to ensure that your plan is properly set up. They will carefully review the plan to determine if there are any material misstatements that could result in fraudulent reporting due to intentional or unintentional errors.

 

Once this information has been gathered and reviewed, the auditor can then use it to file a report, which is officially known as Form 5500. This is then filed with the Department of Treasury who will then review and approve it. It is filed electronically by your company after the audit is complete. 

 

Partner with Taurus CPAs 

 

The term “audit” is associated with a variety of negative connotations, but in this case it provides many benefits – both to your company and your employees. In addition, an employee benefits audit can identify errors that were honest mistakes and allows you to see where improvements can be made in your policies and procedures.

 

Taurus CPA Solutions has a department of expert auditors who are current on auditing and accounting standards. In addition they are completely familiar and up to date on ERISA, IRS, and DOL laws and regulations that are unique to these types of audits.

 

In addition, our firm is a member of the Employee Benefit Plan Audit Quality Center of the American Institute of Certified Public Accountants – which means we have met specific practice management requirements in areas which include training, quality control, and self monitoring.

 

An employee benefits audit doesn’t have to be a stressful procedure when you’re partnering with the experts at Taurus. 

Contact us today, and let’s get started.