Tag Archives: employee benefit plans

Important Considerations When Choosing a Benefit Plan Auditor

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ASK THESE QUESTIONS TO GAUGE EXPERIENCE AND KNOWLEDGE

Choosing a qualified benefit plan auditor can be a challenging process, particularly for the uninitiated. Selecting an inexperienced auditor or one with a less than stellar track record can have lasting ramifications on your plan. There are several factors to consider when evaluating potential auditors:

  • The firm’s experience with auditing benefit plans. To perform an audit in accordance with the standards, tests need to be performed that are unique to benefit plans. The firm you select should be committed to the training of its staff, not just in audit skills, but in understanding how benefit plans operate and the regulatory requirements to which plans are subject.   The firm should audit more than just a few plans a year in order to provide you with the most efficient and effective audit. Teaching an audit team how an employee benefit plan works can be very frustrating for you, the plan sponsor.
  • The firm’s willingness to commit to a consistent audit team. One of the biggest complaints plan sponsors have is that they see new auditors every year. Ask about practices in assigning staff to engagements and their record of staff continuity.
  • The depth of the firm’s expertise. Issues arise during audits, especially in the first year. Make sure the firm you choose will help you through the issues, and not just refer you to legal counsel or tell you to figure out how to fix the problems. Also, be sure there are more than one or two individuals in the firm who have benefit plan experience.   Turnover is high in public accounting and you want to be sure that if one person leaves, the expertise is still at the firm to handle your account.

To learn more about Aronson’s Employee Benefit Plan Services Group, please contact partner Kate Petrillo at 301.231.6200 or by email via kpetrillo@aronsonllc.com.

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Facing Your First Benefit Plan Audit? Start Here!

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HOW TO PICK A BENEFIT PLAN AUDITOR

There are plenty of benefit plan auditors out there – over 7,000 in fact. However, don’t make the mistake of believing that just any company can effectively audit your plan. Department of Labor statistics indicate that one in three audits performed are deficient, and the DOL has made hundreds of referrals to the AICPA Ethics division for this poor work. Unfortunately, the negative exposure from a failed audit reflects on you, the plan sponsor, so it is important to select a firm you can trust. Here are some suggestions on how to find a qualified auditor:

  • Ask people that you trust in other organizations who they use for their plan audits and if they are satisfied with the service provided.
  • Ask your providers, brokers or ERISA counsel if they have recommendations based on their other clients’ experience and satisfaction.
  • Review the American Institute of Certified Public Accountants Employee Benefit Plans Audit Quality Center (EBPAQC) directory of auditors who have agreed to meet specific training, experience and monitoring requirements.
  • Consider a formal RFP process to gather information that you need to make an informed decision. The EBPAQC also has guidance on what an RFP might include.

Selecting a benefit plan auditor is an important decision that should be undertaken with great care. Stay tuned for more information coming soon on additional considerations. To learn more about Aronson’s Employee Benefit Plan Services Group, please contact partner Kate Petrillo at 301.231.6200 or by email via kpetrillo@aronsonllc.com.

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401(k) Sponsors Beware: A DOL Limited-Scope Audit is Not Really “Limited”

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Is your employee benefit plan participant count causing you to become dangerously close to needing an audit? Have you just received your compliance testing results from your record-keeper and realized that your benefit plan requires an audit this year? Your first response may be to panic (because who doesn’t panic at the word “audit”?). Then you find out that your plan will be subject to a limited-scope audit rather than a full-scope audit. Whew! Luckily, your custodian provides certified trust statements, eliminating the need for the auditor to perform investment valuation and investment purchase and sales testing. So, what else could the auditors really test in a benefit plan? The reality may surprise you!

While a limited-scope audit may scale back the scope of the audit and reduce the amount of testing to be performed during fieldwork, the audit procedures are not reduced as significantly as you might expect. A limited-scope audit still requires a substantial amount of testing to be performed. Fieldwork will consist of an in-charge auditor and one or two staff accountants who will test contributions, distributions, notes receivable from participants and expenses paid from the plan. These tests of plan transactions are outlined in the AICPA Audit & Accounting Guide for Employee Benefit Plans and will be performed regardless of the scope of the audit.

The only procedures that are reduced in a limited scope audit are the testing of investment valuation, investment income and investment activity.  Not performing this testing only saves a few hours, especially when the investments held are readily marketable. Also, even though investments might not be tested in a limited-scope audit, the auditor still needs to review and evaluate the extensive footnote disclosures on investments that are required in the financial statements. Also be aware that the audit file and the financial statements are all subject to the same amount of first partner and quality control review regardless of whether the audit is a full or limited-scope audit.

While a limited-scope audit does reduce the overall time and procedures for a benefit plan audit, it may not reduce them as much as a plan sponsor would expect. Be aware that a limited scope audit is a real audit, and plan sponsors should expect their personnel, payroll and plan records to be scrutinized.

For more information on the difference between full scope and limited scope audits and how you can be better prepared for either scenario, contact Aronson’s Employee Benefit Plan Services Group at 301.231.6200.

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Dollar Limits on Compensation and Benefits Announced

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The Internal Revenue Service has announced the 2014 cost-of-living adjustments for various limits affecting employee benefit plans. The more common limits are detailed below for 2013 and 2014.

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If you should any questions about how these limits apply to you please contact Mark Flanagan of Aronson’s Employee Benefit Services Group at 301.231.6257.

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