The purpose of an employee benefit plan audit is to ensure the funds in the plan are not being misused or mismanaged. It also ensures the plan is being operated in accordance with the plan document. The audit examines the net assets available for benefits and the changes in those assets from year to year, along with plan activity and participant transactions. It may sound like a daunting task, but the process can yield some great benefits from a compliance and savings standpoint.
Main benefits of an audit
An audit will ensure your company remains compliant with new legislation. Specifically, the Affordable Care Act (ACA) requirements have placed more demands on employee benefit plans and have changed rules regarding excise taxes. Ensuring compliance with laws and regulations and doing so in a timely manner can save your company from enormous headaches and costs down the road. In fact, the Department of Labor may issue fines of up to $1,100 per day for late submission of audited financial statements.
- An audit is an educational process which can help you understand your organization’s responsibilities as they relate to your employee benefits plan and it can help you overcome any complexities involved in the process.
- An audit will help you carry out your legal responsibility to file a complete, accurate and timely annual return/report for your plan each year. Generally, Federal law requires companies to audit employee benefit plans with 100 or more participants as part of its obligation to file an annual return (Form 5500 series).
- An audit helps plan sponsors and administrators to prepare a complete and accurate Form 5500 filing.
- An audit will help ensure that necessary funds are available to pay retirement, health, and other promised benefits to your employees.
- An audit provides a sense of comfort to employee participants, which can boost morale and employee retention.
- An audit identifies improvements that are needed in plan operations and administration.
What to ask your auditor to optimize your annual audit results
- Have the plan assets been fairly valued?
- Are plan obligations properly stated and described?
- Were receipts of contributions to the plan timely?
- Were benefit payments made in accordance with plan terms?
- If applicable, were participant accounts fairly stated?
- Are there any issues that may impact the plan’s tax status?
- Were any transactions prohibited under The Employee Retirement Income Security Act of 1974 (ERISA) properly identified?
Seeking Better Coverage for Your Employees
The paramount benefit of a benefits plan audit is finding better coverage for your employees. If the legal obligations don’t motivate you enough to start an audit, your desire to provide the best insurance to your employees should be your drive to ensure the audit is done in a timely manner each year.
And, since insurance plans change each year, you and your employees may end up saving significantly when it comes to the costs of the coverages you offer.
Contact us today for more information on how we can help you save money on your employee benefits plan.