Going through an Employee Benefit Plan (EBP) audit can be a daunting process and choosing the right auditor is critical. By Cody Daughtry
Do you need an audit? Generally, plans with more than 120 eligible participants are required to have an audit, but there are other factors that can have an effect. If your plan consists of fewer than 120 eligible participants at the start of the plan year, you don’t require an audit if you file as a Small Plan for your Form 5500. However, if you file as a Large Plan, you will require an audit. There are also exceptions regarding health and welfare plans, depending on whether the plan is considered funded or non-funded.
Who is an eligible participant? This can be confusing. Eligible participants include all active employees in addition to employees who meet all eligibility requirements, but do not yet participate in the EBP. Eligible participants also include any terminated employees carrying a balance in an EBP on the first day of the plan year.
When do I need an EBP audit? The timeframe for an audit is within seven months of the end of the plan year and must be conducted prior to the expiration of this period, although you can apply for an extension for an extra two and a half months, if necessary.
CHOOSING AN AUDITOR
It’s critical to carefully select your auditor. In addition to expertise, cost and ability to meet deadlines, it’s vital to consider how many EBP audits the firm conducts. Firms with smaller EBP audit practices have significantly higher deficiency rates, which puts their clients at risk. Warren Averett performs more EBP audits than any other firm in Alabama, including six of the eight largest plans, and our team of experts can help you too.
What will my auditor consider? The prominent focus is on participant-related activity and transactions. As a result, an EBP auditor will concentrate on the following areas:
- Demographic characteristics
- Payroll data
- Distribution documents
- Deferral percentages
Claims that were paid concerning health and welfare plans
- Plan document requirements
Plan investments are equally important. Regardless of whether you are conducting a full scope audit or an ERISA section 103(a)(3)(c) audit, the plan’s financial statements must encompass all relevant disclosures required in the reporting framework.
MEET THE EXPERT
Cody Daughtry, CPA, CITP, is a Warren Averett Audit Manager. Cody has experience in assisting clients in various industries with retirement plans, health and welfare plans, defined contribution and benefit plans. Reach him at 334-260-2208 or Cody.Daughtry@warrenaverett.com.