The initial deadline to complete an audit for Form 5500 Annual Return/Report of Employee Benefit Plan is quickly approaching on July 31, 2024, for companies that have calendar year plans. Meanwhile, an employer may require an extension by filing IRS Form 5558, which allows for an extended filing date of October 15, 2024.

Employee benefit plan (EBP) audits should not be taken lightly or viewed as unnecessary. Planning for an EBP audit should begin months in advance of the extended deadline to ensure the audit is completed on time and the plan avoids any penalties for late filing. In order to ensure an efficient, effective and timely audit is conducted, there are a handful of critical items that employers and their benefits advisors need to assemble and have available to their auditors. 

Benefit advisor 'must-knows'

When a benefit advisor conducts an employee benefit plan audit, they should focus on several key aspects to ensure compliance, accuracy and completeness. This includes ensuring ERISA compliance, verifying timely and accurate filings with the IRS and DOL, and reviewing plan documents to ensure they are up-to-date. Advisors should also confirm that all plan amendments are properly documented, verify participant eligibility, and ensure accurate calculations and timely deposits of contributions. Reviewing financial statements for accuracy, ensuring benefit payments are correctly calculated, and assessing the effectiveness of internal controls over plan operations are also crucial. 

Contracts with third-party service providers should be reviewed for compliance, and participant communications should be timely and accurate. Additionally, there should be a clear audit timeline and a process for establishing corrective actions. Fiduciaries must be adequately trained and free from conflicts of interest. By focusing on these areas, benefits advisors can conduct thorough and effective audits, ensuring employee benefit plans remain compliant, accurate and beneficial for all participants.

 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.