As an administrator, you do your best to keep your employee benefit plan in compliance, but is your plan ready for an independent audit by an accounting firm? Due to the complexity of the Department of Labor regulations governing employee benefit plans, and its many requirements, a plan audit can be overwhelming. Whether you have a small plan that does not need an audit or a large plan and you are preparing for your first audit, the following control processes may help avoid common compliance errors and make the audit process easier to manage:
- Determine whether your plan should be filing a Form 5500 as a small or large plan. Only plans being filed as large plan require this audit. To see if your plan meets the large plan threshold, go to our website under Employee Benefit Plan Audits and click on the link “When does a retirement plan require an audit.”
- Verify plan compensation payroll settings are consistent with plan compensation as defined in the plan document. Employees involved in the payroll cycle should also be educated on plan compensation to ensure proper plan withholdings are made on all types of payroll, including manual, bonus, or commission checks.
- Confirm that employee plan withholdings on the payroll journal agree in total to the amount on the census and the amount deposited into the plan.
- Verify the employer contribution, including any match calculations, follows the plan document. The total should match the amount on the census and the amount deposited with the recordkeeper.
- Make sure that compensation, employee deferrals, and employer contributions equal the amount tested in the annual discrimination testing.
- Maintain a remittance schedule which tracks the date employee contributions and loan payments were withheld (paydate) and the date they were remitted to the plan.
- Management should review and monitor deposits to ensure they are remitted to the plan timely and properly allocated to the participants’ accounts.
- Record and retain minutes of plan committee meetings, discussions, and decisions to document the committee’s fiduciary monitoring.
- Retain current and historical signed plan documents, including adoption agreements and plan amendments. Also retain plan contracts with service providers and trust agreements.
- Retain all provided enrollment forms, beneficiary designations, and participant elections for deferrals and investments. Further, if deferral elections are maintained by the recordkeeper, periodically download this record for company retention. Many recordkeepers purge this data after a certain number of years or if a plan leaves the recordkeeper.
If you have questions or would like more information, please contact Lisa Carrick at email@example.com or 844.4WINDES (844.494.6337).