Employee Benefit Plan Audits

Employee benefit plans (EBPs) are a crucial component of a competitive compensation package, as they offer financial security and well-being to employees - fostering loyalty and engagement. But for employers, ensuring the plans are compliant and running smoothly requires regular audits - which need to consider new regulations, best practices, and emerging trends to remain compliant.

About Employee Benefit Plans

EBPs encompass a wide range of programs offered by employers - including health insurance, retirement savings plans (like 401(k)s), disability insurance, and paid time off. These plans are subject to various accounting and regulatory standards; which is why audits play a vital role in ensuring that the plans are administered according to these guidelines, protecting both employers and employees.

What an EBP audit involves

An EBP audit is a comprehensive assessment of an employee benefit plan's financial statements and operational procedures. Auditors evaluate whether contributions are being made correctly, benefits are being paid appropriately, and the plan is adhering to relevant laws and regulations. The scope of the audit can vary depending on the size and complexity of the plan.

New legislation to consider

The landscape of EBP audits is constantly evolving, particularly with the recent implementation of the Secure 2.0 Act. This act impacts how plan participants are counted, potentially affecting audit requirements for certain plans. Employers and auditors need to be familiar with these changes to ensure proper application of auditing procedures.

Best practices for EBP audits

To ensure a smooth and efficient audit process, it's vital to follow best practices. These include:

• Maintaining accurate and complete records: Having all necessary documentation readily available streamlines the audit process.
• Open communication: Clear and consistent communication between plan administrators, auditors, and relevant stakeholders is essential.
• Proactive approach: Addressing potential issues before the audit commences can help minimize delays and disruptions.

Trends in EBP auditing for 2024

Here are some key trends to watch in 2024:

• Increased focus on cybersecurity: Auditors are likely to place greater emphasis on cybersecurity controls to safeguard sensitive employee data.
• Data analytics: The use of data analytics tools will likely become more prevalent for identifying potential risks and ensuring compliance.
• Focus on participant experience: Auditors may delve deeper into the participant experience, assessing how effectively employees are informed and engaged with the plan.

EBP audits are a critical tool for ensuring the financial health and regulatory compliance of employee benefit plans. By staying informed about new legislation, adopting best practices, and recognizing emerging trends, employers and auditors can work together to safeguard these valuable programs for employees in 2024 and beyond.