Top 5 Employee Benefit Plan Audit Issues, Episode 1

Mark Deters:Hi, I'm Mark Deters from Creative Planning. I am a retirement plan advisor and fiduciary to our clients' plans.

So Brenda, I know today we're talking about the top challenges that you and your team experienced this past auditing season. And to set the stage a little bit, you and I are on two very different sides of the same business, being retirement plans. I know we tend to work with a lot of the same providers, and the retirement industry can be a bit convoluted because there's so many different providers, right? If you're a plan sponsor, you could have a third-party administrator, you could have a recordkeeper, an advisor. You have your investment managers, an auditor. And we're all working together to try to put together a nice clean audit. And of course, that's your job and the job of your team.

So the question for you is what really made this year different? Because when I speak to all these different providers, I am getting the resounding theme that this was by far the toughest auditing season. So what made it different, and what did you see from your end?
BD:I saw a lot of delays. And when you look underneath the hood and say, "Okay, why is there a delay in getting information that I normally would get more timely?" When you started having the conversation with the clients, with their service providers, it was very clear that the great resignation had hit hard in our industry. And with that came a lot of individuals that were no longer either with my clients, with their service provider, with their payroll provider. And when those people walked out the door, the knowledge went with them.

So there was a bit of scrambling of, "Where do I get this report?" Or, "Susie used to give it to me and she's no longer here." And with that added delay. Some of my clients were more forthcoming with the fact of saying, "Hey, I know we talked about this and we were going to get you XYZ report by Monday. It's not happening." And then I could plan accordingly and we could work through it. Some, not so much. So communication is definitely key.

And that was something that I really saw come forth and tried to come alongside my clients and help if somebody left within their organization, giving them some wisdom of what I remember the report was called or who helped so-and-so get it and come alongside them and just help them through that process if I could. A new client, obviously, I didn't have that background knowledge and tried to just troubleshoot of different people to ask that may have the information we would need.
MD:I think we experienced the same challenges this year on this topic because on our end, remember we're the fiduciary, so we're trying to document that there is a fiduciary process in place, and more importantly, it's actually being followed. So what we're trying to do is we're reaching out to the third-party administrator, to the recordkeeper. We're reaching out to all these people, and we found that it was not only at the client, like you mentioned, it's also at the third-party administrators. The TPA who knew this plan intimately is no longer there, so they didn't have the information. So they're tapping onto a new contact who has to look everything up, maybe had issues tracking down where the documents are stored. So we absolutely experienced that as well on our end.
So if now someone's coming to you and they say, "Hey, Gene used to manage the plan internally and Gene's moved on, and he knew where everything was." What are some thoughts to you for somebody who's coming in and inheriting this role as to how they can get acquainted with the plan and really make sure they have a smooth audit this year?
BD:The first thing I would tell the individual is know your plan's provisions, understand what the details of the plan document says, and make sure that you are following those provisions. And so there's one thing of what it says, but then there's application.
Another item that is very helpful with audits is to start early. Best practice that I have with clients, new and continuing, is to have a kickoff call. I like to have that call in February, March timeframe and go over all the different items that we'll need. Talk to the client. "Hey, have there been any changes? Have there been anything new or anything that you experienced this past year?" Because we're talking in February and March and going back in time for the previous year of what we're going to be auditing if it's a calendar year plan.

So having those discussions early and understanding who's doing what, when it'll be available. A lot of times you're at the mercy of the recordkeeper trustee of when they're certified reports will become available. So getting that timeline in the mix of that, say April is when they're going to release those certified statements. That helps the audit. Talking to the payroll team, when's the Census going to be available and reconciled. That all comes together in that initial kickoff call. If you have all those players on there, you can get everyone to buy in of, "Okay, yes, we will have this available by X date." Or, "We will work to make sure it's reconciled." And then everybody's on the same page and we can keep the ball moving.
MD:Okay. So it sounds like doing a acquaintance, getting reacquainted with your plan meeting would help reeducate the contact with the plan itself, how it's been structured, and how it's running. And it's interesting that you say February, March, because I know a lot of auditors say more like June, July is when to start the process. So you pad in a couple of extra months in that process.
BD:I do because you never know what is going to happen, and there could always be some special projects that come on the scene that will delay the process. So if you can build in that cushion, then it takes the pressure off. I mean, we're all running so fast and trying to get so many things accomplished. If you can add some buffer in to allow someone to just breathe, I've found great success in being understanding of everybody's schedule and have that cushion so that you don't feel like it's breathing on your back.
MD:Yeah. Yeah. I know in one of the coming episodes we'll talk a little bit more about special presence, which is one of my favorite things that you've taught me.

But thank you all for joining us on this first episode of the Top Five Issues Identified in Benefit Plan Audits. In the next episode, we'll address what happens when an auditor finds a discrepancy in a plan, and the importance of reconciling items between TPA information and plan documents.

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