The deadline for an employee benefit plan to file a Form 5500 is July 31. The Employee Retirement Income Security Act requires that an annual audit of many large benefit plan’s financial statements be conducted by an independent qualified public accountant. If your company sponsors an employee benefit plan, you should be aware of this type of audit process.
What is an Employee Benefit Plan Audit?
The Federal government generally requires an employee benefit plan that has 100 or more participants receives a formal audit as part of filing a mandatory annual return/report (Form 5500 Series). This audit process helps fulfill the legal responsibilities that are part of filing a complete and accurate annual return/report for an employee benefit plan.
The Importance of a Quality Benefit Plan Audit
If you have passed the 100-participant mark or you have received a letter from the DOL, you could benefit from an employee benefit plan audit.
A quality audit can help protect the assets and financial integrity of your employee benefit plan by ensuring that funds will be available to pay the benefits that have been promised to participants and beneficiaries.
Benefit Plan Audits have Unique Requirements
Employee benefit plan audits have specific requirements. The U.S. Department of Labor suggests that every plan administrator selects an accountant who has the knowledge and expertise to perform an audit in accordance with accepted professional standards.
You will need an audit if you have 100 or more participants at the start of the plan year or your enrollment has exceeded 120 participants.
Eligible participants include:
- All employees who are eligible to contribute to the plan
- Separated participants
- Beneficiaries of deceased participants who are receiving or are entitled to receive benefits
Audits Improve Compliance
An employee benefit plan audit is done mostly for compliance reasons. An audit is also a terrific tool to help improve operations and internal controls surrounding core company functions, such as payroll.
Employee benefit plans must meet the following Department of Labor rules and regulations:
- Every eligible employee is given the same opportunity to participate
- The assets of the plan are fairly valued
- Contributions have been made in a timely manner
- Participants’ accounts are accurate and fairly stated
- All issues that may affect the plan’s tax status are identified
Once complete, the audit is attached to and filed with the plan’s Form 5500, which is due by the last day of the seventh month after the end of the plan year. You may apply for a two-and-a-half-month extension if necessary. Your completed audit and your Form 5500 may be filed electronically with the Department of Labor.If you have additional questions about employee benefit plan audits, contact a local tax professional.