That depends on who you ask. If you ask an employer that takes their fiduciary obligations seriously, or one that has had problems with their plan in the past, then the audit is very valuable. However, if you ask an employer that is not so in-tune with their fiduciary obligations and views the audit as a commodity that goes to the lowest bidder, then the audit is a hassle and of little or no value.
For many, a benefit plan audit is not an option:
Once a retirement plan falls into the large plan category, an audited financial statement is a required Form 5500 attachment. A large plan for Form 5500 purposes is generally defined as a plan that has more than 100 eligible participants on the first day of the plan year. Under the 80-120 rule (to be discussed in greater detail in a future AronsonBlogs.com post), the 100 becomes 120 if the plan filed as a small plan filer in the previous year.
Benefit plan audits have become overburdened with additional standards and tremendous price pressures. The amount of time required to complete a compliant audit has increased significantly with little or no perceived value by many plan sponsors. “It is just a few pages required to be attached to a 5500 and besides the accounting firm has signed it so what do I have to worry about?” This is a familiar position taken by many plan fiduciaries when it comes to their benefit plan audit – a position that could potentially be very costly, when you consider that the Department of Labor continues to report that roughly 30% of the audits show deficiencies. These deficiencies are the plan sponsor’s problem, not the auditor’s; a problem that could ultimately lead to a full blown DOL audit!
So, with general DOL audit results showing more than 70% of plans with problems that cost many plan sponsors several hundred thousand dollars to fix, the real value of a benefit plan audit could very well be several hundred thousand dollars. In addition, sponsors should find value in auditors that can help them enhance the operation of the plan, provide insight into the overall benefit plan industry, and that are technically superior in their methodology.
In the end, the true value associated with a benefit plan audit is the protection and insight that can be provided to plan fiduciaries and sponsors. Please contact Mark Flanagan of Aronson’s Employee Benefit Plan Services Group at 301.231.6200 for more information.