Defined Contribution Plans Audit Best Practices
TRAINING OBJECTIVES Understand audit requirements Understand what auditors do Provide recommendations for documentation best practices ** The remarks made during this presentation relate to audits of qualified plans under Title I of ERISA
AUDITS Independent audit – limited or full Audit by the Internal Revenue Service Audit by the Department of Labor Audit required by statute
WHY AUDITS ARE IMPORTANT Assists management in meeting fiduciary responsibility Produces more reliable information for managing the plan and preparing participant disclosures DOL relies on CPA audits Required by law Contributes to sound pension and retirement security system
THREE PHASES OF AN INDEPENDENT AUDIT Planning Fieldwork Completion
PLANNING Gain an understanding of the plan’s operations Assessment of control environment Analytical and substantive procedures Fraud assessment Changes in plan environment Assess regulatory correspondence Provide audit requests
FIELD WORK Census/demographic data Eligibility Deferrals, employer contributions, and rollovers Distributions and loans Timeliness of contributions Analytical review of investment income Investment transactions (if full scope) Transfers, mergers, terminations
FIELD WORK Certain compliance areas (bonding, non-discrimination testing, prohibited transactions) Related parties and parties-in-interest Inquiries of management and legal counsel Review of Form 5500 for material inconsistencies
COMPLETION Subsequent events procedures Reviews by various levels in firm Client review and approval of financial statements Management representation letters and required correspondence Financial statements to accompany Form 5500
WHAT DO AUDITORS NEED? Personnel records W-2 and earnings statements for specific periods Enrollment forms and investment elections Rollover forms and copies of checks Wire transfer documentation Loan documentation
WHAT DO AUDITORS NEED? Distribution forms and copies of checks (including spousal consent if necessary) Non-discrimination testing results Documentation of compliance
ELECTRONIC ENVIRONMENT What if the information requested is not available in hard copy? Service provider or plan administrator may have confirmation of transactions Alternative procedures Confirmation with participants is best source!
COMMON ISSUES FOUND IN PLAN AUDITS Information not available (client and recordkeeper) Operational Deficiencies Prohibited Transactions Timeliness
COST AND COMPLIANCE Cost of a quality audit is worth it Be serious about compliance and fiduciary responsibilities The cost of non-compliance is greater than complying
CONTACT INFORMATION Christopher Nardone Christopher.Nardone@cohnreznick.com 959-200-7058 Kristin Hustus Kristin.Hustus@cohnreznick.com 959-200-7241 CohnReznick LLP www.CohnReznick.com