It is never too early for plan sponsors to start thinking about the organization’s employee benefit plan audit. Generally, audits can’t begin until the spring, when the recordkeepers have provided the audit package, which includes a collection of reports detailing the plan’s operations for the year. Following is a list of items that auditors will need over the next couple of months and what plan sponsors should do to prepare.
If there were any changes to the plan documents during the year, such as an amendment or restatement, the documents can be sent to the plan auditor ahead of time to inform them of important changes. As a result, the auditor can adjust their audit procedures accordingly. This is also a good time to ensure an updated copy of the company’s Fidelity Bond coverage and copies of any minutes related to the plan are on file.
By the end of January, the recordkeeper should be provided with the annual census that they will use to run certain testing. The plan auditor will also need a copy of the census, and it is a good practice to send them the census at the same time it is provided to the recordkeeper. Once a plan sponsor receives the nondiscrimination testing results from the recordkeeper, action may be needed. It is important to respond promptly to any action required and keep the plan’s auditors in the loop regarding any action taken.
Plan Contributions
As year-end close procedures are being finalized, this is also a time to review the organization’s contributions to the plan. Contributions remitted to the plan should be reconciled to the organization’s W-3. Don’t worry if there is a variance. A common reason for this is due to the timing of the contributions. For example, the final payroll of the year may have been paid on December 31, and it is being included in the W-3, but the plan may not have received the money until January 1, therefore needing a reconciliation of the amounts. This is also an excellent time for plan sponsors to make sure the schedule of contributions for the year is updated and includes a listing of all payroll dates with their corresponding employee and employer contributions and the date the funds were remitted to the plan. If there are any late payments, it is always a good practice to address them immediately.
SOC and Cybersecurity
It is important to remember to review any SOC reports relevant to the plan. Plan sponsors should pay close attention to the relevant control objectives as well as the complementary user entity controls and make sure that they are designed and operating effectively. This is also a great time to make sure all service providers are following strong cybersecurity practices. The Employee Benefits Security Administration has prepared best practices for use by recordkeepers and other service providers responsible for plan-related IT systems and data, and for plan fiduciaries making prudent decisions on the service providers they should hire. Learn more about best practices by reading Withum’s insight on Cybersecurity Guidance for Employee Benefit Plans.
Preparing for an employee benefit plan audit requires proactive efforts, including maintaining accurate records and ensuring compliance with regulatory requirements. With some advanced planning, several items needed for the audit can be provided ahead of time, ensuring a smooth and timely audit!
Contact Us
For more information about this topic, contact a member of Withum’s Employee Benefit Plan Services Team.
