If your business wants to (or already does) offer employee benefits, then you need to start thinking about an employee benefit plan audit. Yes, it’s a mouthful. And yes, you must know what it is to truly improve the health and wellbeing of your company.
In this article, we do a quick dive into what is an employee benefit plan audit (EBP audit), what the benefits are for your business, and if it is a requirement. Read further to find out!
What Is an Employee Benefit Plan Audit?
An EMB audit is when you diligently evaluate employee benefit plans to identify areas in which you could improve the management or the spending of benefits.
You’re going to need a team with an eye for detail since all aspects of your benefits package for employees will be inspected thoroughly. This may include:
- Stock option plans
- Severance packages,
- 401 k(s)
- Pension and/or saving plans
- Health and welfare
- Union representation
- and a lot more
Is an EMP Audit Mandatory?
An EMP audit is not only beneficial but also, at times, necessary. The Department of Labour requires companies that provide employee benefits for more than 100 employees to submit an EBP audit conducted by an independent party. This requirement is set by the Employee Retirement Income Security Act of 1974 (ERISA).
Here are some more logistics: An audit will be required once a year, and is due 7 months after the plan year ends. The number of employees will include employees who have chosen to opt-out of the plan, as well as retired or terminated employees who still have plan balances.
The penalty for failing to conduct an audit can be quite severe. So, ensuring compliance alone should be enough motivation for you to carry this out and choose the right independent party for the job.
Not just any company can handle EBP audits. It takes special training, knowledge, and strict accordance with the Internal Revenue Code (IRC) standards. You can recognize companies that offer reliable services for an employee benefit plan audit by a team with technical expertise and a commitment to ensuring your compliance.
What Are the Benefits of an EMP Audit?
The benefits of EMP audit goes well beyond merely complying.
Here are a few others: Firstly, it’s an investment in your business because it helps you avoid financial fraud and abuse. Secondly, it protects your business from internal errors and possible deception from employees. Thirdly, it helps you identify areas in which you can save money and improve operations, efficiency, and controls. Lastly, it improves the benefits for your employees. If your data is accurate and well-organized, it becomes a lot easier to make better decisions for your employees.
Provide Value to Your Employees
Although conducting an employee benefit plan audit is often a necessity (if you’re a ‘large’ business), it’s also a key to providing the best benefits possible for your employees. It’s important to be familiar with these rules if you’re responsible for their wellbeing!
For more information about running your business efficiently as possible, check out the rest of our blog.