By Mike Bedel, CPA, MBA, CGMA
Partner, Director of Audit & Assurance Services
[email protected]
As summer arrives, our Audit & Assurance Services team has started planning for audits of employee benefit plans. Many employers offer a 401k plan as a benefit to employees to help them prepare for retirement.
These 401k plans are regulated by the U.S. Department of Labor (DOL). One of the regulations they impose is the requirement of an audit when the plan exceeds approximately 100 eligible participants.
There are two types of audits that are performed on defined contribution employee benefit plans: a full-scope audit and a limited-scope audit – both permitted by the DOL.
The limited-scope audit, as described by its name, is a shorter version in which the auditors rely upon a certification by the trustee of the employee benefit plan in place of full auditing procedures on the investments in the plan. This limited-scope audit is less costly and, as a result, a much more popular choice.
One of the common deficiencies in employee benefit plan administration is a lack of understanding of the fiduciary responsibilities of those involved in the plan. While many employers view this plan as a benefit to employees, the responsibilities assigned by the Department of Labor should not be set aside.
Another common deficiency often identified in employee benefit plans is related to the timely remittance of employee contributions. When an employee has withheld funds from their paycheck, designated for their 401k account, it is the responsibility of the employer to remit those funds in a timely manner. Holding those funds for a week, in essence, is the same as the employer taking an interest-free loan from their employees.
The DOL has been clear in their guidance that if payroll taxes can be remitted in the matter of a few days, they expect that 401k contributions are to be remitted in the same timeframe.
Sponsel CPA Group is a member of the AICPA’s Employee Benefit Plan Audit Quality Center and is qualified to perform audits of most 401k plans. We are also available to help management teams prepare for an outside audit of their plan. And we have a team that can provide third-party administration services for your benefit plan throughout the year, should you wish to outsource this function entirely.
If you are interested in assistance with your employee benefit plan, please contact Mike Bedel at (317) 613-7852 or email [email protected].