As 2017 draws to a close, plan administrators and plan management should be aware of the rising risks and complexities associated with the plan administration and audit of their employee benefit plans.
- Contributions – specifically the timely remittance of employee contributions
- Trustee minutes – documentation that plan management has properly evaluated the plan, plan service providers, fund performance, expense ratios, etc.
- Plan Compliance – ensuring the plan maintains its tax exempt status in light of the IRS’s termination of the Employee Plans Determination Letter Program and that all plan provisions are being appropriately followed or applied
- Distributions – specifically the proper distribution of amounts in compliance with plan terms
- Expenses – ensuring the plan is paying appropriate administration expenses
- Eligibility – ensuring participants are timely enrolled in accordance with plan terms and proper withholdings are established
- SOC Report – ensuring that plan management does an appropriate review and evaluation of the Service Organization Controls reports including an evaluation of user controls
What's changing?
The Department of Labor continues to hire auditors, perform more audits, select more plans for desk reviews and create additional regulation complexities around benefit plans. These actions continue to raise the risk level associated with employee benefit plans as the DOL can levy significant fines and penalties. As a plan administrator, there is a fiduciary responsibility to act in the best interests of the plan.
The 2015 DOL study of selected plan audits continues to be applicable today. It showed deficiencies in more than two out of every three audits issued by firms performing less than 25 plan audits, demonstrating that the size of an employee benefit plan audit practice and the quality of the audit are closely correlated.
| Number of Plans Audited |
Number of CPA Firms |
Total Number of Audits Performed |
Audits With Deficiencies |
| 1-2 |
3,684 |
4,891 |
75.8% |
| 3-5 |
1,519 |
5,773 |
68.4% |
| 6-24 |
1,603 |
17,747 |
67.4% |
| 25-99 |
433 |
18,910 |
41.5% |
| 100-749 |
77 |
15,418 |
12.0% |
| 750+ |
14 |
18,423 |
12.0% |
Numbers based on 2015 DOL study
That study also concluded that the best audits were being done by firms that 1) have a strong practice in auditing employee benefit plans (i.e. the more audits performed, the better the results), 2) have specific employee benefit plan audit training for staff, and 3) have a membership in the American Institute of Certified Public Accountants’ Employee Benefit Plan Audit Quality Center. All of this goes to show that plan fiduciaries need to make sure existing relationships and low costs don’t take priority over quality and experience.
Need more information?
For more information on making informed decisions for your employee benefit plans, please contact Aron Dunn, AGH’s employee benefit plan audit team leader, using the information below.
Senior Vice President
Assurance Services
Aron Dunn leads AGH’s employee benefit plan and agribusiness teams. He also has exeperience in employee benefit plan audits, mergers and acquisitions and refinancing.
Aron is a certified public accountant and a member of both the American Institute of Certified Public Accountants (AICPA) and the Kansas Society of Certified Public Accountants (KSCPA). He previously served as one of the youngest-ever KSCPA chairs and now leads KSCPA’s Auditing and Accounting task force and the Peer Review Process Improvement Task Force. He is also a past president of the Wichita Chapter of the KSCPA and a member of AICPA's Accounting & Review Services Committee, among other AICPA committees and task forces.
Information in this document has been obtained by Allen, Gibbs & Houlik, L.C. from sources believed to be reliable. However, AGH does not guarantee the accuracy nor completeness of any information. This communication does not and is not intended to provide legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly, AGH assumes no liability whatsoever in connection with its use. Nothing in this communication can be used to avoid penalties that may be imposed by a governmental taxing authority or agency.