Whether this is the first time you’ve gone through the process or the fifteenth, the annual audit of your company’s employee benefit plan can seem overwhelming. But it doesn’t need to be. If you are working with a quality audit firm, and you follow some basic steps to prepare, you can get through the audit timely with minimal disruptions to your already busy schedule.
Why does my company need to have an annual audit?
To protect the health and retirement assets of your employees and your company, federal law generally requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file an annual return/report, the Form 5500. Some pension plans with fewer than 100 participants may also be required to have an audit if they fail to meet certain conditions relating to their plan investments, bonding, and disclosure requirements.
A quality audit serves several purposes. First and foremost, it helps to verify the financial integrity of your plan and ensure that funds will be available when they are needed to pay retirement, health and other promised benefits to your employees. Secondly, it helps fulfill your plan’s legal responsibility to file a complete and accurate annual return or report each year. It’s important to select an experienced, reliable auditor to avoid penalties that could be imposed due to an incomplete, inadequate or untimely audit report.
By uncovering problems, the annual audit reduces fiduciary responsibility risk. The annual audit can help identify compliance problems early. It is always easier to fix an operational failure earlier in the plan life.