A number of clients have recently inquired about audits involving employee benefit plans (EBP) so I thought this might be a good time to review the audit requirements and the services our firm provides to help clients in addressing them.

Generally, federal law requires employee benefit plans with 100 or more participants (considered a “large” plan) to have an audit as part of their obligation to file an annual return/report (Form 5500 Series). However, there is an exception for plans that are close to this threshold. The 80-120 Participant Rule allows plans with between 80 and 120 participants at the end of a plan year to report using the same category that was used the previous year.

For example, assume that a plan had 75 participants at the end of 2012 and reported as a “small” plan with no audit requirement. If the plan has 115 participants at the end of 2013, it may choose to report using the same category that was used in 2012, and therefore avoid the audit requirement. However, if the same plan had 125 participants at the end of 2013, it would be required to report as a “large” plan and be audited.

If an EBP is required to have an audit, one of the most important duties of the plan administrator is to hire an independent auditor for the plan.

A quality audit helps ensure the financial integrity of a plan and protect plan assets. A quality audit also will help a plan administrator carry out its legal responsibility to file a complete and accurate annual return/report for the plan each year. In addition, it will provide a greater level of comfort with the information reported by the plan among the employees and management of the plan sponsor as well as key external stakeholders.

Auditors of employee benefit plans may encounter issues related to the Employee Retirement Income Security Act of 1974 (ERISA), and IRS and Department of Labor (DOL) regulations in addition to typical audit concerns. Our firm’s audit team has significant experience with employee benefit plans and commits considerable resources to training each year.

Whalen & Company is a member of the Employee Benefit Plan Audit Quality Center of the American Institute of Certified Public Accountants and, as such, are committed to quality and training standards that set us apart from other service providers.

Throughout the audit process we work closely with our client and the client’s third-party administrators to ensure that their fiduciary responsibilities are fulfilled and that the plan participants are well served while retaining the objectivity and independence expected from an independent CPA firm.

If you have questions about an EBP audit or wish to discuss how we might assist you and your business, please contact me.