Denver companies that offer an employer sponsored retirement plan are faced with a bevy of rules and regulations to follow. Mandated by the Employee Retirement Income Security Act (ERISA), there are a number of participation standards, vesting rules, benefit accrual regulations, and fiduciary responsibilities requirements for plan management. In addition, there are testing requirements to follow, Form 5500 filing obligations, grievance process updates, and plan loan and distribution rules. Matters become more complicated when a plan transitions from the small to large plan status. Once the threshold is crossed there are several new regulations to follow including the need for an annual plan audit.
The annual plan audit is an important compliance exercise that requires the technical expertise and practical experience of a qualified plan auditor. According to a DOL Study, it was found that 39% of plan audits contained one major audit deficiency. It also found that firms performing the fewest audits experienced a 76% deficiency rate. In addition to the number of audits performed, there are other considerations to make including peer review results and commitment to ongoing training. To help clients, prospects, and others, Whipplewood CPAs has provided a summary of the ley details below.
Key Quality Considerations
- Number of Plans Audited – One important determinant of quality is experience, and the report referenced above is clear that experienced auditors commit fewer mistakes. When evaluating plan auditors, it is important to identify not only the total number of audits conducted, but also the types of plans included in that number. There are several different types of retirement plans including both defined contribution (403b and 401k) and defined benefit (pension and cash balance) plans. Ensuring the auditor has experience with the appropriate plan type is essential during the evaluation process.
- EBPAQC Membership – The Employee Benefit Plan Audit Quality Center is a resource group designed to help further the education, knowledge, and training opportunities of members. When evaluating plan auditors, it is important to identify if they are members of this center. This is important because not only does it illustrate a commitment to quality, but also provides access to expanded training and educational opportunities. In addition, the above-mentioned study found that non-member audits had 5 or more major deficiencies.
- Peer Review – In the accounting profession, a peer review is an external review of an auditor’s work as it related to quality control. The purpose is to provide additional insights and recommendations on how to improve the quality of audit services. When evaluating a plan auditor, it is important to inquire about peer review frequency and whether any negative findings were uncovered. It may also be useful to inquire about how identified issues have been addressed and remedied.
- DOL Referrals – Ensuring the potential auditor is not currently, or has not previously, been investigated by the Department of Labor (DOL), or other agency is essential. When evaluating a plan auditor is important to ensure the provider does not have a history of making serious mistakes or costly errors. The last thing a plan sponsor wants to discover is their auditor is under investigation by the AICPA or state board of accountancy.
- References – A reputable audit firm should include references as part of a submitted proposal. In the event references are not provided it is important to request them. When evaluating a plan auditor, it is important to follow up with references to understand how the auditor works, key details about the audit process, and to obtain information on the intangibles such as the auditor’s approach to a transition, etc.
Finding the right benefit plan auditor should be more than a fee-based decision. While cost is almost aways a consideration, it is also important to evaluate the firm’s ability to deliver a timely and quality audit for your company. If you have questions about the information outlined above or need assistance with your next plan audit, Whipplewood CPAs can help. For additional information call 303-989-7600 or click here to contact us. We look forward to speaking with you soon.