Three Months Out: Employee Benefit Plan Audit Best Practices to Avoid a Last-Minute Fire Drill

Jul 12, 2017

Are you behind the benefit plan audit eight ball? With the July 31^st Form 5500 filing deadline fast approaching, are you missing your company’s audit report to attach to the filing? Perhaps you didn’t realize your company had an audit requirement or maybe the deadline crept up faster than you anticipated.

Fortunately, you have options. Denise Woods and Kelsey Burgess offer the following key steps to help ensure that this year’s audit and future audits run smoothly for all parties involved.

1. Make sure your plan’s Form 5500 is extended.

For calendar year plans, the filing deadline is July 31^st.  A quick call to your plan’s third party administrator requesting that they file a Form 5558 on your behalf can get you an extra 3 ½ month extension. Be sure to follow-up prior to July 31^st and request a copy of the extension for your files.

 2. Get the audit scheduled.

Contact your plan auditor to discuss the scope of the audit, timing and fees. If this is your first employee benefit plan audit and you need some help identifying a CPA, consider asking other HR executives in your personal network about their audit experiences. Alternatively, your third-party administrator or investment advisor may also have suggestions. Prior to signing the engagement letter, consider asking a few of the following questions to ensure that you are retaining a qualified auditor:

• What qualifications and experience does the firm have with respect to employee benefit plan audits? What about the actual team members that will be working on your audit?
• Does the team have experience with your plan’s provider/third party administrator?
• Is the firm part of the AICPA Employee Benefit Plan Audit Quality Center?

3. Understand the audit process and agree to a realistic timeline.

With a quickly approaching deadline, taking the time to understand the process and agreeing to a realistic timeline is vital. If this is a new audit relationship, request that the auditor walk you through their audit process and be sure to ask the following questions:

• What items will be needed and by when?
• How will information that may contain sensitive participant data be shared/safeguarded?
• Will the audit be done at your location or remotely?

 With a good understanding of the process, work with the audit team to create a timeline.

• Consider personal and work-related commitments when setting a timeline.   With proper planning and communication, these events will not create delays or problems when trying to meet deadlines.
• A significant portion of the audit support will need to be provided by your plan’s provider. Before finalizing the timeline, make sure your plan provider is on board with the timing.

 4. Take a deep breath and tackle one thing at a time.

Preparing for the audit may feel a little overwhelming at this point, but tackling one thing at a time should make tasks feel more manageable. Here are a few tips:

• Since the audit is being completed more than seven months after the plan’s year end, it’s easy to forget all that has happened with the plan. Take some time to go back through plan related correspondence both within the company and with your plan providers, read investment committee minutes and thumb through plan related documents. Being prepared to answer the auditor’s inquiries will put your mind at ease and will help to ensure that everyone works as efficiently as possible.
• Most plan providers offer resources to assist with the annual plan audit. If available, consider providing “read only access” to your audit team. In most cases, this will allow the auditor to request information directly from the third-party provider rather than putting this burden on you.
• If a certain task is taking an exorbitant amount of time or is really confusing, stop what you are doing and give the auditor a call for clarification. Often, a short discussion can simplify a task and alleviate unnecessary stress.
• Schedule calls with the audit team just ahead of key deadlines per the timeline to ensure that everyone is on track. If something comes up, this will allow both parties to work through the issue in a timely manner and reset expectations, if necessary.

 5. With the completed audit report in hand, end on a productive note.

Schedule a face-to-face meeting or conference call with the audit team to discuss the good, the bad and lessons learned. Provide constructive feedback to the audit team and consider asking them to reciprocate. Collaborate on ways to make next year’s audit even better, including when to begin with an earlier timeline at the helm. 

As Denise notes, “our most productive client relationships are the ones where we are in touch with the plan sponsor year-round, with them sharing updates and/or changes to their employee benefit plans in real time.” Keep this in mind as you work with your audit team moving forward.

In the meantime, get that Form 5500 extended! It’s the first step to avoid unnecessary fines…and to ensure that deadlines are met, so you’re able to enjoy a much-deserved vacation!