The Department of Labor recently issued a report highlighting a need for improvement in audits of employee benefit plan financial statements. And, as it seems focused on ramping up audits, the United Benefit Advisors in a recent white paper warn that it’s not a matter of if, but when the U.S. Department of Labor will audit an employer.
“Regardless of how sound your company’s business practices may be, a DOL audit needs to be dealt with professionally and expediently,” Les McPhearson, CEO of the UBA, said in a news release. “Every organization should be prepared so this potential disaster can be handled with confidence. A DOL audit is so significant that once a company is embroiled in the audit process, that should be their top priority. We cannot stress enough the importance of being prepared.”
Such audits review documents and other plan materials to ensure plan sponsors are obeying federal laws “by holding the correct documents and administering those documents consistent with federal laws and regulations,” writes Craig J. Davidson forEmployee Benefit News.
This attention to audits comes after the Department of Labor released its study on audits of 2011 Form 5500 filings, Ken Tysiac writes for the Journal of Accountancy. “The DOL’s Employee Benefits Security Administration found that 61 percent of audits fully complied with auditing standards or had minor deficiencies,” he writes. “One or more major deficiencies were found in 39 percent of the 400 audits examined in the study.”
So, how can employers prepare? A little preparation goes a long way, writes Phyllis M. Saraceni for the American Bar Association. “Employers can best be ’audit-ready’ by ensuring documentation and procedures are in place to support group health plan compliance,” she said, and employers should especially note their compliance with the Patient Protection and Affordable Care Act. “Plan sponsors are best advised to put in the time now to build a system to locate and catalog plan documents.”
The better an employer prepares, she writes, the more efficiently a DOL audit will be resolved. “Proactive compliance reviews require some time and effort up front, but will likely pay off in the event a plan is selected for audit,” Saraceni writes.
Brokers can help by providing advice, Davidson writes. “Producers do not have to teach employers about health and welfare plan administration, but you will score relationship points if you do,” he writes. “Scheduling appointments with your groups now is wise given this current season when the DOL wants to play hardball.”