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Department of Labor Asks Employers to Seek Qualified Benefit Plan Auditors

Late in December the Department of Labor (DOL) sent out an important communication to companies across the country about their Employee Benefit Plan Audits. The DOL is encouraging plan fiduciaries to take a closer look at their auditors’ qualifications and move to a firm like Frazier & Deeter that utilizes specialists who focus on benefit plan audits and are able to perform a quality audit in this highly specialized area.

The DOL has performed multiple studies on audit quality over the years and is understandably concerned about the 40% error rate that they find in employee benefit plan audits. Most of the errors found result in significant plan deficiencies that can put the participants’ retirement accounts at risk and jeopardize the tax qualification status of the plan.

In July of 2015 Frazier & Deeter’s Employee Benefit Plan practice wrote a blog (DOL Survey says: choose your EBP Audit Firm Wisely) about the DOL survey and the extreme level of errors the survey uncovered. As the annual cycle for plan audits begins the DOL has upped the ante by sending plan administrators specifics about the qualifications a plan auditors should have.

In an effort to encourage plan administrators to utilize qualified specialists to perform Plan audits, the DOL contacted plan administrators in December of 2015, describing the issues that result when unqualified auditors are utilized for Plan audits. With this communication, the DOL asked plan fiduciaries to examine their auditors’ qualifications and consider a move to a firm that utilizes specialists who focus on benefit plan audits and are able to perform a quality audit in this highly specialized area.

The DOL’s December communication suggests that employers consider the several factors when selecting an auditor, including:

  • The number of employee benefit plans the CPA audits each year, including the types of plans;
  • The extent of specific annual training the CPA received in auditing plans;
  • The status of the CPA’s license with the applicable state board of accountancy;
  • Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to a state board of accountancy or the American Institute of CPA’s for investigation; and
  • Whether or not the CPA’s employee benefit plan audit work has recently been subject to a peer review and, if so whether such review resulted in negative findings.

The DOL has also published a pamphlet “Selecting an Auditor for Your Employee Benefit Plan” found at: http://www.dol.gov/ebsa/publications/selectinganauditor.html.

Currently, there are thousands of CPA firms across the country that perform Employee Benefit Plan audits using under-trained and unqualified staff. Often these firms do not have specialists who focus on Employee Benefit Plans and often they are not well informed about DOL requirements.

This push for quality audits from the DOL is excellent news for employees who participate in a plan, as well as for plan fiduciaries. Correcting errors is both costly and time consuming and many headaches can be avoided by simply having qualified auditors work with you on your plan and its audit.

About the authors

Frazier & Deeter is a charter member in the American Institute of Certified Public Accountants’ (“AICPA”) Employee Benefit Plan Audit Quality Center and a leading provider of employee benefit plan services, with a team that has performed thousands of benefit plan audits. Frazier & Deeter’s employee benefit plan services group is comprised of dedicated ERISA specialists who can assist with plan design issues, plan operation and compliance, and other general employee benefit areas as well as plan audits. The firm’s Employee Benefit Plan partners are Chris Etheridge and Jeff James. Etheridge and James offer Frazier & Deeter’s clients the benefit of 20+ years of experience in this specialized area.

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