Taking the “dread” out of the impending Employee Benefits Plan audit deadline

The spooky season is now upon us. But the impending Employee Benefits Plan (EBP) audits deadline doesn’t have to be so frightful, courtesy of a little foresight and expertise from a trusted accounting partner. And, while the October 15 drop-deadline continues to apply, there are changes afoot that underscore the need to partner and communicate with your accounting team, early and often.


We are especially aware of the stress that was already present for many of our client organizations, brought on by society-wide changes in the past 18 months. Any change can be stressful. So, it is important to have a partner with experience navigating evolving broad social shifts, as well as legislative shifts. This provides peace of mind that your company’s critical and private data is in exceptional hands. If ever there was a time to support the sustained viability of employee benefits packages, it would be now as the full-on “war” for internal talent appears to be universally shared across sectors and industries.


A chill (and change) is in the air


Audits associated with Employee Benefit Plans (EBPs) have become both increasingly more complex and are facing increasingly greater scrutiny from the U.S. Department of Labor. Leadership with the American Institute of CPAs (AICPA) report that today’s auditor reports are more transparent than they were in the past. Indeed, audits that assure the quality of financial statements associated with EBPs covered under ERISA (the Employee Retirement Income Security Act of 1974) have presented an ongoing challenge and opportunity through the decades. From these audit assessments, recommendations have been made on a continuous basis through the years to enhance the quality of EBP audits, reducing errors and failures to meet requirements concerning disclosures and reporting.


Additionally, EBP audit-related changes are occurring due to the pandemic and responses such as the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). For one, EBPs may have been altered hurriedly during the pandemic, which only reinforces the importance of documentation for audits; for instance, new audit considerations have ranged from penalty-free withdrawals to suspensions of required minimum distributions.


Due to the rise in remote work arrangements, there are also a flurry of internal control changes to account for, assess for gaps and describe in work papers. It is imperative that you, as a client and your team, get the latest copies of EBP amendments in order and provide them to us promptly. We will further need to report these amendments, regardless of if their motivations were pandemic-related or not, and address how that content was acquired. If employees’ responsibilities have changed in more recent months, we will want to assure that specific activities related to EBP haven’t got lost in the shuffle.


These changes are also converging new auditing standards that will be taking effect for 2021 calendar year-end statements. These changes address foundational concerns; for instance, risk assessment. It is vitally important that we have the documentation of any and all resources used to arrive at various judgments. That way, it’s easier to understand how different conclusions were reached. As mentioned, standards changes are being undertaken to enhance transparency. Partly, as partners, we are tasked with assuring:

  • Substantive communications with management

  • Comprehensive and clear reporting

  • The development of a two-pronged opinion, which clearly states our results/findings

  • Performance requirements; for instance, acknowledgement of responsibilities, inclusion of effective amendments for risk assessment, pinpointing relevant provisions


A full list of changes can be found here, and if you have any questions about our process, we welcome them! That is what we are here for.


The more things change, the more they remain the same


Of course, regardless of broader societal or regulatory changes, hefty documentation is always a good practice. Assuring we have proper documentation is a team effort that saves you and your associates time and headaches over the long haul. It is also the backbone of a successful audit -- guiding its planning, performance, supervision, and accountability. Think of it as a step-by-step “map,” which can then be leveraged by those regulatory bodies who are reviewing the results of all that planning and documentation. In this manner, reviewers and regulators can follow the “bread crumbs,” retracing the steps that were taken to arrive at respective conclusions within the report. In fact, there is an old chestnut that applies here: It is better to be overzealous in one’s documentation, than to potentially “under document” or fall short of the information that one needs. Account for all possibilities and, as they say, “CYA” (Cover Your Backside (sic)!). Additional words that we and our partners live by, which couldn’t ring truer, include:

  • Specifics are king when it comes to the audit. We can never be too detailed. We won’t write that we talked to a vague “John” or “Jane” to solicit information or get confirmation to a question. Rather, we will detail when we spoke to the person, and name that person fully with respective titles. Additionally, it is important in these matters to account for exactly what was said. Same goes for reports. We will specify the exact title of the report that we pulled, not just a general category of the document, i.e., distribution reports.

  • Test, test and test some more. All works papers and supportive documents should be retraced and retested, and their purposes, processes, and conclusions fully scrutinized.

  • “Not available,” “not necessary” or their ilk are, simply, not in our vocabulary. There is no place for these terms in the audit report; however, if we do stumble upon a situation where “not applicable” is truly appropriate, we will explain why that is the case. An example might include omitting a step associated with employer contributions due to the employer’s lack of offering a match.

  • The audit is only as strong as its parts. In other words, each of the working papers that are used should be strong enough to stand on their own and should contribute favorably to the overall success of the audit. If a reviewer were to assess just one random paper, they could easily determine each test that was completed, the individuals consulted with and exactly what content was scrutinized.


Look, we all know that things like “COVID fatigue” or “Zoom fatigue” are very real. We’ve lived them, day in and day out, for the past 18 months-plus. By partnering with a team that you can trust, and communicating early and often, you can avoid some of the additional stresses and exhaustion that are caused by the “American way” (procrastination!). This must-have process for the sustainability of an important talent retention and attraction tool no longer has to be a dreaded, seasonal nightmare. Let’s take the fright out of the EBP audit and roll with those changes!


5 views0 comments