EBP Audits - Taking Care of Your Employees (and Yourself)

Recent financial market conditions and uncertainties have thrown new risks into the best of your employees' financial plans.

As Plan Sponsor and primary fiduciary of your employees' 401K funds, it is extremely important for you to be in compliance with ERISA, DOL and other regulations relating to your fiduciary duties.

The Employee Retirement Income Security Act (ERISA) requires an independent audit of employee retirement benefit plans of companies that have 100 or more eligible participants at the beginning of a plan year.*

In addition, a recent Supreme Court case (LaRue vs. DeWolff Boberg and Associates, February 21, 2008) ruled that companies can be held liable if employees lose money in their 401K's due to negligence.

Auditing retirement benefit plans like a 401K is quite different than a general audit. Auditors need specific knowledge about benefit plan practices and operations as well as the standards, rules and regulations that apply to these plans.

The U. S. Department of Labor recommends the following criteria be covered in an audit:

·  Whether plan assets covered by the audit have been fairly valued;
·  Whether plan obligations are properly stated and described;
·  Whether contributions to the plan were timely received;
·  Whether benefit payments were made in accordance with plan terms;
·  If applicable, whether participant accounts are fairly stated;
·  Whether issues were identified that may impact the plan's tax status;
· Whether any transactions prohibited under ERISA were properly identified**

*Plans with fewer than 100 eligible participants at the beginning of the plan year are considered to be a small plan for filing purposes. Audited financial statements are not required for a small plan filing if specific requirements are met under the small pension plan security regulation. Consult with your Plan Administrator and Trustee to validate the Plan Sponsor's reporting requirements.


**Source: www.dol.gov/ebsa/publications/selectinganauditor.html