ERISA Audit Dos and Don’ts: Common Mistakes to Avoid When Managing Employee Benefit Plans
It is critical to perform ERISA audits since employee benefit plans are significant, and their management must be proper to conform to the law. These audits assist in ensuring that employees are protected and are provided what they have earned in terms of retirement benefits or medical allowances. It is important that any organization implementing these perks understand how to go about these audits appropriately.
Nonetheless, the process of auditing can be full of challenges, and mistakes can easily be made. If these mistakes are avoided, organizations are able to meet legal requirements and establish trust with their workers who depend on these perks.
What Exactly Is an ERISA Audit?
An ERISA audit is an examination of the employee benefit plan financial statements and operation for compliance with the Employee Retirement Income Security Act (ERISA). This type of audit is not only the process of checking figures but also making sure that the plans are run in a predetermined manner which complies with the legal requirements. They are important since they are able to help identify problems before they become bigger, thus offering the assurance that the employee benefits funds are safe and well managed.
Things That Should Not Be Done When Conducting an Audit
a. Neglecting Required Documentation
One common mistake is a lack of documentation. All the transactions and decisions made in the form of benefit plans should be recorded. When key documents are missing, then an audit is likely to fail.
b. Improper Plan Asset Valuation
Every year, it is necessary to report the value of the plan assets properly. If an asset is overvalued or undervalued, a lot of problems may arise in the future.
c. Failure to Review Plan Operations
From time to time, check how the plan operations align with the official plan documents. Compliance issues arise when there is disparity between the actual implementation of the plan and what the documents describe.
d. Ignoring Eligibility Errors
It is important to ensure that all employees participating in the plan are qualified to do so. Employment eligibility mistakes are actual compliance violations, as they lead to improper employee benefits allocations.
Dos of ERISA Audits
a. Regular Compliance Checks
It is recommended to undertake compliance checks now and then to determine whether guidelines have been followed or not. This approach can be proactive to ensure small problems do not escalate to a larger level.
b. Thorough Record Keeping
Make sure that all these transactions and administrative decisions of the plan are well recorded and documented. Besides enabling compliance, this practice helps in the audit process.
c. Engaging Qualified Auditors
Appoint auditors who have specialized in ERISA regulation. Their wealth of experience will be of tremendous essence in the process of handling ERISA issues and coming up with a good audit.
Conclusion
It is imperative to avoid these common mistakes in order to make employee benefit plans compliant and secure in the event of an ERISA audit. The above dos and don’ts are to help organizations safeguard their and employees’ interests while properly and legally providing the due benefits. Bear in mind, the purpose of the ERISA audit is not only to meet legal requirements but also protect the rights earned by employees.
