Auditing Services for Employee Benefit Plans
Employee benefit plans must meet numerous and complex tax qualification requirements in order to obtain and maintain an exemption from federal income taxes on investment income. In general, however, when a plan is able to meet those qualification requirements, participants in the plan do not pay taxes until they receive income in the form of distributions from the plan. The maintenance of an employee benefit plan requires the plan sponsor to exercise certain fiduciary duties, and comply with numerous requirements under law, and under regulations issued by the Internal Revenue Service and Department of Labor.
Extensive Rules – Many Regulators and Standard Setters
The Employee Retirement Income Security Act of 1974 (ERISA) provides minimum standards of vesting, funding, and fiduciary behavior for pension and welfare benefit plans. ERISA also established the Pension Benefit Guaranty Corporation (PBGC) to insure benefits in case certain types of pension plans were unable to meet benefit obligations.
ERISA also established record-keeping and financial-reporting responsibilities for plans and imposed a requirement for certain plans to have an annual audit of their financial statements. The Department of Labor (DOL) and the Internal Revenue Service (IRS) have issued regulations specifying requirements for the financial records, tax return, annual report, and audit. Those requirements include financial statement requirements and audits in accordance with generally accepted auditing standards (GAAS).
After ERISA was enacted, the Financial Accounting Standards Board (FASB) established financial accounting and reporting standards for defined benefit pension plans. The American Institute of Certified Public Accountants (AICPA) followed with accounting and reporting standards for defined contribution retirement plans and health and welfare benefit plans as well as guidance on auditing all types of plans in accordance with generally accepted auditing standards (GAAS).
Most small and midsize businesses employ a number of outside experts to assist them with the maintenance of their plans and compliance with law and regulation. Depending on the plan and the sponsor’s circumstances, some combination of outside trustees, custodians, investment advisors, insurance providers, third party administrators, record-keepers, accountants, lawyers and auditors will be required. In addition, a knowledgeable individual or group of individuals within the sponsoring company will be required to take responsibility for the plan, acting as trustees and performing management functions.
Specialized Accounting and Auditing
Benefit plan audits require specialized expertise. Over the years, in performing numerous employee benefit plan audits, we have developed an approach that meets all the applicable requirements, minimizes disruption, and allows the process to be completed as efficiently as possible. If your plan is subject to a required audit, we can assist you in developing a strategy to meet that regulatory requirement in a way that is both effective and economically efficient.
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