Preparing for Your Plan Audit Part 1: Census Reconciliation
March 01, 2022
By Brenda DeSaro
An accurate census greases the wheels to start the audit of an employee benefit plan.
What is a census? A census is a report generally populated from your payroll system for a specific period that contains relevant data. The most common items found in a census are employee name, employee identification number, Social Security number, union member, non-union member, date of hire, date of birth, date of termination, part-time employment status, full-time employment status, gross wages, 401(k) eligible wages, bonuses, commissions, employee deferrals and employer contributions. There can be other data fields, depending on the specific provisions of the plan.
The period of the activity that the census captures depends on the plan year-end. If the plan is a calendar year, then the census will capture paycheck dates for employees from January 1 to December 31. If the plan is a fiscal year, then the census may be from July 1 through June 30 for a June year-end plan.
The purpose of the census is to provide a complete population of employees of the plan sponsor. The best way to make sure your census is complete is to reconcile appropriate data field totals to a government-filed form, such as Form W-3 (W-2 total page), for a calendar year-end plan that shows total wages and employee deferrals. Then compare it to the total wages and employee deferrals on the census. The total of the employee deferrals should also agree with the total of employee deferrals on your plan’s schedule of contributions report (to be discussed in our next blog), which is used to determine if contributions are made timely to the plan.
What if the census does not agree with a government form total? Generally, the total of employee deferrals can be found on the W-2 total page (Box 12D) and compared to your census for calendar year-end plans. If you are trying to reconcile gross wages to the W-2 total page, that total will not be in any of the boxes on that form. To remedy this, the Box 1 data field (wages, tips, other compensation) can be added by employee to the census and compared to the W-2 total page. An overall reconciliation in total from gross wages to Box 1 can also be shown at the bottom on the census. Reconciling items may include adjustments made for GTL, 401(k), cafeteria plans and so forth. If it does not reconcile, check and see if there were any corrections made to the W-2 total page (e.g., Form W-2C).
As a best practice, the census should be created once the W-2s are completed to make sure any year-end adjustment or corrections have been captured in your payroll report. Another great approach is to add compensation-type fields to the census that align with your plan document provisions for the definition of compensation. For example, if your plan document excludes bonuses and your census shows the total by employee that received a bonus, it will be easier to verify eligible compensation for your plan.
A reconciled census can help start your audit because it allows the auditors to see who is potentially eligible to participate in the plan. The census also provides the participant data to select and test various provisions of your plan from a population that is deemed complete.
Accss the rest of this blog series below: