Independent Audits Of Employee Benefit Plans

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Independent audits of employee benefit plans are a vital accountability mechanism. An employee benefit plan audit provides a third-party, independent report to participants, plan managers, and the Department of Labor that indicates whether the plan’s financial statement provides accurate information to assess not only the plan’s present but future ability to pay participant’s benefits. An employee benefit plan audit must do more than substantiate financial statements; it must also address plan operations including helping to assess whether the plan is operating in accordance to the plan documents and amendments. There are multiple complex laws and regulations that employee benefit and retirement plans must also comply with, and failure to comply with such laws and regulation can result in substantial penalties. The Employee Retirement Security Act of 1974 requires that employee benefit plans with a hundred or more participants to be audited as part of their requirement to file annual Form 5500 report. The Form 5500 is filed with the Department of Labor and used to satisfy the Internal Revenue Service’s requirement to file an annual information return. Inconsistencies in the Form 5500 report can result in the Department of Labor performing their own audit. While auditing employee benefit plans, auditors often find operational and administrative issues encountered by plans. Of the many issues that arise, the more common problems are errors in definition of compensation,
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