PLANSPONSOR - June/July 2019 - 14

Upfront
Testing Participant Data
plan administrator, the government and
participants needed financial statements
reviewed by an independent auditor to
make sure retirement plans are properly
managed for participants. "
" The whole idea of the audit is to
ensure that a plan is being run in accordance
with its plan documents, " notes
Jennifer Moore, a CPA and director of
401(k) audit service at PriceKubecka PLLC.
The agencies also want to confirm
that " plan participants aren't being
defrauded, " says Robert Forni, a partner
at Ropers, Majeski, Kohn & Bentley P.C.
Two main types of audits are permissible:
limited scope and full scope, Morris
says. A limited-scope audit is more
focused on the participants in the plan, to
make certain their accounts are correct,
whereas a full-scope audit delves into
more detailed testing of the plan investments,
she says.
" The areas of focus and testing in
both types of audits include: employee
and employer contributions, distributions,
eligibility testing, and investment
income allocation, " Morris continues.
Distributions, vesting and forfeitures are
tested, as well, she adds.
The audited financial statement
ANY retirement plan with 100 or more
participants must be independently
audited by a certified public accountant
(CPA) firm and submit those findings with
the annual Form 5500 it electronically files
with the Department of Labor (DOL)-
which, in turn, shares it with the IRS.
It is therefore imperative that plan
sponsors work with a qualified CPA firm.
According to " Assessing the Quality of
Employee Benefit Plan Audits, " a study
done by the DOL's Employee Benefits
Security Administration (EBSA), 39% of
14 PLANSPONSOR.com June - July 2019
plans that were audited had either unacceptable
or major deficiencies, says Anne
Morris, employee benefit plan practice
leader at Windham Brannon P.C.
Further, the auditor must use generally
accepted accounting principles
(GAAP), says David Guadagnoli, a partner
at Sullivan & Worcester LLP. Form 5500,
including the audited financial statement,
is used by the DOL, IRS and, in the case
of a defined benefit (DB) plan, the Pension
Benefit Guaranty Corporation (PBGC),
Guadagnoli says. " Congress felt that the
Art by Luyi Wang
package always includes, at the beginning,
an auditor's opinion letter from the
accountant, explaining the scope of his
work, Guadagnoli says. This is followed
by the financial statements and any necessary
explanatory footnotes.
The DOL is not only concerned that
contributions are made promptly; it wants
to see that, " if any tasks were done incorrectly,
the proper steps were taken to fix
the issues, " says Tom Foster, national
spokesperson for workplace solutions at
MassMutual. The financial audit may turn
up issues of concern to regulators. Mistakes
can trigger further audits by the IRS, DOL
or both, he says. -Lee Barney
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PLANSPONSOR - June/July 2019

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