Audits should not be left to one department

In addition to a litany of other responsibilities, leaders may view an employee benefit plan audit as something they can simply delegate to one department or person to handle and then check the task off their to-do list. This mindset exposes the company to potential personal liability, as those involved in the oversight of the plan have a fiduciary obligation to ensure the plan is operating in accordance with laws and regulations. Completing an EBP audit is a team effort and requires cohesion amongst multiple departments to ensure all information is available to the auditor.

The role of HR

An EBP audit will involve many parties, including but not limited to human resources and financial accounting departments, a benefits advisor, an actuary, a third-party administrator, Employee Retirement Security Act of 1974 (ERISA) legal counsel, investment trustees and administrators, as well as the independent auditor.

There are many moving parts in the audit process, and each one may look a bit different from company to company, including the specific roles that each department plays; but no matter how it gets done, all EBP audits are subject to the same standards from ERISA and the U.S. Department of Labor.

Human resources professionals may be asked to wear multiple hats and could be responsible for executing various responsibilities within an EBP audit. HR professionals can significantly contribute to a more efficient and effective audit process. 

Gathering and preparing documentation

The human resources department may be responsible for preparing and providing necessary documentation related to employee benefits, including plan documents, amendments, participant records, and other relevant information. These documents will be essential to the completion of the audit. 

Liaison between auditors and the company

Another critical role for human resources professionals will be facilitating timely communication between the auditor(s), the organization, and other stakeholders like third-party administrators or service providers. They will be the internal link to make sure that auditors receive the information they require from internal teams as well as external partners.

Data verification

Human resources professionals are often responsible for the bulk of employee data, including benefits eligibility, contributions, and distributions. One of their most important responsibilities is to ensure the data is accurate and complete. This may involve verifying personnel records, contribution records, and distribution records. 

Compliance assurance support

While compliance assurance will likely not be left solely to the human resources department, they will have to assist in the process of ensuring that the organization is in compliance with applicable laws, regulations, and the provisions of the plan documents. The department may also be asked to explain the internal control environment and protocols as it relates to employee benefit plans.

After the audit

Addressing audit findings

After the audit, human resources may play a role in addressing any findings or recommendations made by the auditors. This could include making necessary corrections, amending plan procedures, or improving internal controls to ensure better compliance and accuracy going forward.

Education and training of relevant personnel

Human resources professionals may be asked to educate and train personnel on the provisions of the benefit plans, regulatory requirements, and best practices. It's also advisable for human resources to be aware of any changes in the regulatory environment that might impact employee benefit plans and the audit process, in both the current year as well as future years.

Maintaining historical records

Once the audit is completed, one of the most helpful tasks for human resources professionals would be to maintain organized, accurate and accessible historical records related to employee benefit plans.

Process improvement

Based on the audit, the human resources department can make recommendations to improve the processes and systems involved in employee benefit plan administration. With their guidance, they could help to minimize errors, ensure compliance, and improve efficiency, facilitating a smoother process for future audits.

By actively engaging in these functions, the human resources department can significantly contribute to a more efficient and effective audit process, ensuring that the organization's employee benefit plans are compliant, well-administered, and accurately reported.

Brittany Carrier is Senior Manager at UHY LLP.