Employee Benefit Plan Audit - Frequently Asked Questions
|FREQUENTLY ASKED QUESTIONS
In general, for a qualified benefit plan under Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), pursuant to ERISA Section 103(a)(3)(A) and 29 CFR 2520.103-1(b), when the number of eligible participants as of the first day of a plan year is 100 or more, an audit is required for defined contribution plans and defined benefit plans. All employees who are eligible to contribute to the plan are treated as eligible participants, regardless of whether or not they contribute to the plan. Also included in the number of eligible participants are the retirees or separated participants and beneficiaries of deceased participants who are receiving benefits or are entitled to receive benefits. If you are unsure as to whether your plan requires an audit, please feel free to contact us.
Which type of audit is needed, full scope or limited scope?
The first step in determining which type of audit is needed is to find out who holds the investments. If the Plan’s investments are held by a bank, trust company or insurance company, and that regulated institution certifies to both the accuracy and completeness of the investment information, a limited scope audit may be allowed. ERISA Section 103(a)(3)(c) allows the plan administrator to elect a limited scope audit (limited scope exception).
Broker/dealers and investment companies are not qualified to certify. Caution: If your plan receives a certification from a broker/dealer or investment company, the certification is not reliable in this scenario and does not enable your plan to qualify for the limited scope exception.
Multiple certifications may be necessary in cases where investments are held by more than one custodian, trustee or insurance company. Limited scope audits may not be performed for plans registered and filing with the SEC, regardless of who holds the investments, as they are not acceptable to the SEC. When a limited scope certification is not obtained or not allowed, a full scope audit is necessary.
What is the difference between a full scope audit and a limited scope audit?
The major difference is that in a full scope audit, audit work is performed on the investments. Audit procedures may include sending confirmations to the custodian, trustee or insurance company to verify the existence and ownership of the investments. Additionally, audit procedures on the valuation of investments, investment transactions and investment income (loss) at the plan level are required.
What types of items do plan auditors ask for?
The area of most focus in a plan audit should be on participant-related transactions and activity. This includes payroll information, deferral percentages, demographic information, distribution paperwork, claims paid (for health & welfare plans), and, most importantly, the plan document provisions. Without the plan document, an audit should not be started.
Just as important as participant data is the plan’s investments. As noted above, the level of audit procedures for investments varies in a limited scope or full scope audit. However, no matter what the scope, a plan’s financial statements must contain all disclosures required by the financial report framework (generally accepted accounting principles).
When is the audit due and who is it filed with?
The independent auditors’ report, along with the plan’s financial statements and necessary schedules is attached to Form 5500; which is filed with the DOL. Form 5500 is due by the last day of the 7th calendar month after the end of the plan year. An extension of 2½ months may be requested. For example, if the end of the plan year is December 31st, the original due date of the Form 5500 and auditor’s report would be July 31st and may be extended to October 15th.
What is the American Institute of CPAs Employee Benefit Plan Audit Quality Center (EBPAQC)?
The EBPAQC is a voluntary membership organization for firms performing ERISA employee benefit plan audits and was established to promote the quality of employee benefit plan audits. The EBPAQC provides members with technical updates, best practice guidance and communication of regulatory developments. The EBPAQC is governed by an Executive Committee that establishes requirements for membership and general policies of the center.
What are the membership requirements of the American Institute of CPAs EBPAQC?
Membership requirements include designating a partner responsible for the firm’s employee benefit plan audit practice, establishing programs to ensure personnel are properly trained and possess current knowledge specific to employee benefit plans, performing annual internal inspection procedures, and making the firm’s peer review report findings publically available.
Why should I look for an audit firm who is a member of the EBPAQC?
EBPAQC member firms attest annually to the AICPA as to their compliance with the membership requirements noted above. At EisnerAmper, we go far beyond our EBPAQC membership with our commitment to the area of employee benefit plan audits, which serves to make us a leader in the industry. This means that with EisnerAmper, you and your plan are being serviced by a firm that has committed resources to this unique area, truly understands the intricacies of employee benefit plans and offers you value-added services that go beyond just an audit report.
We utilize Sharefile, our electronic request tool, which allows clients and our engagement teams to easily share and keep track of data in a secure and organized manner. Our goal is to streamline the audit process and provide support for workflow management. Large files (up to 10 GB) can be uploaded. Tracking and email alerts are sent when files have been uploaded or downloaded.