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DOL Raises the Stakes for the Audit Quality Initiative

Posted 10:28 AM by

The Department of Labor (DOL) is intensifying its audit initiatives for employee benefit plans (both retirement plans and health and welfare plans). DOL has two primary initiatives. First, DOL targets and selects plans based on its own internal criteria which it does not share with the public. Second, DOL selects audits performed on "large" plans with over 100 participants and "audits the auditor" by examining the workpapers of the audit firm who performed the audit.

In either case, DOL may reject a Form 5500 filing found to be incomplete or inadequate. Penalties can be as high as $1,100 per day (capped at $50,000).

Plan Administrators need to be diligent in selecting an auditor for their benefit plan audits who adheres to the highest standards of quality and has considerable experience auditing employee benefit plans. The audit firm should be a member in good standing of the AICPA Employee Benefit Plan Audit Quality Ceneter.

In order to monitor the outcome of an employee benefit audit, the Plan Administrator should ask the auditor:

  • Whether plan assets are reported at fair value;
  • Whether contributions were made completely and in a timely manner;
  • Whether benefit payments were made in accordance with plan provisions;
  • Whether assets have been properly allocated to participant accounts;
  • Whether the tax status of the plan has been compromised; and
  • Whether any transactions prohibited under ERISA were noted.

A quality audit of an employee benefit plan is in the best interests of plan participants and fulfills a fiduciary obligation of the Plan Sponsor.