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You are here: Home / 401k audit / Audit Requirements for Employee Benefit Plans

Audit Requirements for Employee Benefit Plans

October 20, 2015 by EWA LLP

As your small business grows so do your responsibilities, one of which is the employee benefit plan audit. Once your benefit plan reaches 100 eligible participants, it will need an audit as stipulated in the Employee Retirement Income Security Act of 1974 (ERISA). ERISA a federal law that protects the money American employees set aside in their retirement plans by setting standards with which companies in the private industry should comply. This ensures employees get the amount they are entitled to upon reaching retirement age.

But first, does your business really need an employee benefit plan audit? It’s all about the numbers. Take note that “eligible participants” refer to all active employees who meet the eligibility requirements stated in the terms of the plan. They don’t have to participate in the plan to be counted. Also, resigned, retired, and deceased employees who still have plan balances are also counted. This is where many small businesses falter — they mistakenly think that eligible participants refer only to active employees who are enrolled in the plan, so they fail to file as a large plan — and fail to supply results of an employee benefit plan audit.

Failure to perform and pass the employee benefit plan audit can result in penalties or even legal actions as determined by the Department of Labor, so you should be careful to have all the requirements needed. If this is the first employee benefit plan audit for your small business, it can be understandably overwhelming. The following questions along with your documented proof can guide you in preparing for a successful audit:
  • Equal opportunity to participate — Do all eligible participants have the same chance to join in the plan?
  • Timely contributions — Are contributions invested/paid out on time, with very minimal delay, if any? 
  • Fairly valued plan assets — Are the plan assets valued fairly, and not overvalued or undervalued?
  • Fairly stated participant accounts — Are participant accounts clearly defined and fairly stated?
  • Benefit payments following the terms of the plan — Are you adhering to the terms you and your employees have agreed upon?
The best way to comply with and pass the employee benefit plan audit is to be well prepared long before the deadline. For this year, the deadline for electronic filing of employee benefit plan audit results along with the completed Form 5500 was July 31, 2015 (with extensions allowed in only a few cases), so any filing to be made at this time will already be considered late. But for next year, you can start now to meet the 2016 deadline without hassle.

If you’re not sure whether your small business needs an employee benefit plan audit, or if you need assistance with the audit itself, trust only tried-and-tested experts like the audit specialists at Ernst Wintter & Associates. We retain licensed CPAs with extensive backgrounds in employee benefit plans. Our auditors are trained to work cooperatively with you and your third-party administrator without causing major disruptions to your business operations. 

Categories: Filed Under: 401k audit, audit of employee benefit plans, audit specialists, benefit plan audit, employee benefit plan audit, Financial 101 Tags:

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