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Experience Pays When Selecting an Employee Benefit Plan Auditor

March 14, 2016 | BerganKDV Team

Generally, the Employee Retirement Income Security Act of 1974 (ERISA) requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file an annual return/report (Form 5500 Series). If your employee benefit plan is required to have an audit, you probably received a letter in the past few months from the U.S. Department of Labor (DOL) outlining the importance of selecting a qualified and experienced CPA firm to perform your plan’s audit.

Why did the DOL issue this letter?

The DOL sent the letter recently because now is the time when many audit contracts are renewed or are out for proposal. A recent study by the DOL found serious problems with nearly 40% of employee benefit plan audits. The DOL letter states:

  • Employee benefit plan audits are different than other financial audits. They have unique audit and reporting requirements which must be considered when selecting an auditor.
  • Substandard audit work can be very costly to plan administrators and sponsors. Audit work that is incomplete, inadequate or untimely puts plan assets at risk and can result in the DOL imposing substantial civil penalties on the plan administrator.

How do I select an auditor who is qualified and reliable?

  • License, experience and professional development—Federal law requires an employment benefit plan auditor to be licensed or certified as a public accountant by a state regulatory authority. In addition to proper licensure, an experienced employee benefit plan auditor with recent employee benefit plan-specific continuing education training should perform the more complicated aspects of the audit procedures and oversee less experienced auditors on the routine tasks.
  • Independence—an auditor must be independent from the plan and plan management. This ensures the auditor approaches work objectively in order to offer an unbiased opinion about the financial condition and regulatory compliance of the plan. The DOL has established rules of auditor independence. According to these DOL regulations, an audit firm or any of its employees cannot maintain the financial records for the employee benefit plan.
  • Resources—your auditor’s firm needs to have adequate resources to devote appropriate expertise to the unique and complex aspects of your individual plan. A qualified employee benefit plan auditor has a strong understanding how specific plans operate and can provide technical support in the event ERISA, DOL or the Internal Revenue Service (IRS) selects your plan for review.

The DOL outlined five specific factors you should examine when selecting an auditor. Click here to see how BerganKDV matches up with the DOL’s recommended qualifications.

For more information contact a BerganKDV Advisor.

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