Retirement plans are an essential part of every company’s benefits package.
Prospective employees have become accustomed to employers offering a retirement plan and annual contributions to help them save for retirement. Although essential, these plans can sometimes be difficult to manage due to the various rules and regulations which must be followed. Plans with over 120 participants are required to perform an annual benefit plan audit. The purpose is to ensure the plan is operating according to rules and regulations established by the Internal Revenue Service (IRS), Department of Labor (DOL) and key plan documents. When an audit is required, it’s essential to find an experienced firm to conduct the audit. Special attention should be given to experience, training, and types of plan audited during the selection process. To help clients, prospects and others make the best auditor selection, Hanson & CO has provided a summary of key considerations to make below.
Key Questions to Ask During the Selection Process
- How many employee benefit plan audits are performed annually? Employee benefit plan audits are distinctly different from corporate audits. One of the most common reasons for deficient audit reports is the failure of the auditor to perform tests in areas unique to benefit plans. According to the DOL, these deficiencies often stem from inexperience with specialized benefit plan auditing standards. It was determined there was a relationship between the number of plans audited and number of errors committed. Firms with a lower number of plans audited typically committed more errors, whereas those that audited over 20 plans experienced a significantly lower error rate. As a result, it’s important to select an auditor that has experience with these types of audits.
- What specific experience does the firm have with employee benefit plans? Along with the amount of experience, it’s also important to inquire about the types of plans audited. Employee benefit plan teams should have experience with defined benefit and contribution, welfare benefit plans, 401(k), 403(b) plans along with needed experience to meet your needs. For instance, if your company has a more complex Employee Stock Ownership Plan (ESOP), then you will want to find a firm that has experience auditing such plans. The key is to identify a firm that has a broad knowledge base but specific experience with your plan type(s).
- What is the size of the firm? It doesn’t appear from the outset that this would make a difference, but the DOL has shown a correlation between the size of the firm and the probability of audit deficiencies. Firms with 20 or fewer employees were responsible for almost two-thirds of the deficient audits reviewed. Professionals whose sole focus is on audit matters and audit standards or, even better, auditors specifically devoted to employee benefit plan audits will have the practical experience and subject matter expertise to ensure proper compliance.
- What specialized training is provided to auditors? Audit teams should be receiving intensive training each year, including specialized training on benefit plan audits. This training should also include education related to legislative changes and current events in the industry to ensure that the firm stays current with key changes. This is important even if an experienced partner or manager is involved in the initial discussions because many firms assign a significant amount of the day-to-day work to less experienced staff members.
- Are references available? It is common to request references when considering working with a new provider. When speaking with them, ask specific questions about the benefit plan audit experience, the amount and type of testing, any issues that arose and the resolutions, among other things that pertain to your situation. If you are considering more than one firm, do your best to compare the firm’s knowledge and performance for their existing audit clients.
Selecting the right auditor can make the difference between a value driven audit process and one that leaves you looking for alternatives. Carefully reviewing each provider will help you find the best solution for your situation. If you have questions about how to evaluate plan auditors or need assistance with your benefit plan audit, Hanson & CO can help. For additional information please call us at (303) 388-1010 or click here contact us. We look forward to speaking with you soon.