Employee Benefit Plan Audits: Best Audit Practices

Transcription

1 Employee Benefit Plan Audits: Best Audit Practices Kris Tveit, Principal Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.

2 About CliftonLarsonAllen A professional services firm with three distinct business lines Wealth Advisory Outsourcing Audit, Tax, and Consulting More than 5,000 employees Offices coast to coast Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC. 2

3 Employee Benefit Plans Providing employee benefit plan audit, tax compliance, and consulting services for more than 60 years. CLA is a leading provider of employee benefit plan audits in the country with more than 2,500 plan audits across the country* Experience auditing defined contribution plans, defined benefit plans, health and welfare plans and employee stock ownership plans *according to 2015 data from the Department of Labor 3

4 Range of Plan Sponsors From highly sophisticated Plan Sponsors with over 50,000 participants and multiple management leaders involved First time audit with just 100 participants and only 1 person involved Find the smaller sponsors need more direction and recommendation on controls whereas large plans look to improve controls and mitigate risk 4

5 Audit Requirements DOL Large Plan Status New plans - >100 participants on first day of plan year Existing plans - >120 participants on first day of plan year Rule Small Plan Audit Requirements Definition of participant 5

6 Intersection of Audits Financial Statement Audit DOL Audit IRS Audit Reporting requirement Issue an opinion that the financial statements are materially stated No penalties Client/Plan pays for service Compliance with DOL regulations Timely Remittance Plan fees Fiduciary items Subject to criminal sanctions and penalties Compliance with IRS regulations Plan documents Discrimination testing and controlled group rules Distributions and vesting Subject to penalties and plan disqualification 6

7 Audit Scopes Limited Scope Certifying parties: Banks Trust Companies Insurance Companies Choice of Custodian important Full Scope DC plans, DB plans, HW plans 7

8 Auditing Investments Significant disclosure requirements Model Portfolios Alternative investments Fair value considerations Lag in reporting NAV 8

9 Audit Process Sponsor or Plan pays audit fee (new cost to budget for) Required by DOL Scope of Audit (full vs limited) Understanding of the plan documents Understanding of the control environment Detail testing: Employee and payroll records Contributions and Eligibility Distributions and Loans 9

10 Audit Process (continued) Auditor verifies or corroborates the information Differs from how TPAs receive information Audit sampling not a review of all transactions 10

11 First Year Audit.Client Reaction 11

12 First Year Audit Client Reaction...REALITY 12

13 Bring Value to Your Clients Educate sponsors on Large Plan status and requirements Proactively manage participant counts Automatic distribution threshold followed Count only measured on first day of plan year Proper definition of participant who gets counted? Plan Sponsor downsizing monitor if counts can go below 100 to get out of future audits rule 13

14 Auditor Selection DOL focus on auditor quality DOL inspections have had unfavorable results What to look for: Industry experience Industry knowledge AICPA EBP Audit Quality Member Who is the service team Audit process Value added recommendations 14

15 Red Flags Legitimate Client Complaints My audit drags out way too long. I am always filing on the deadline. I am constantly training new staff. The information they are asking for makes no sense. My fees are way to high (keep this in perspective) 15

16 Top Audit Issues Timely Remittance of deferrals and loan repayments Participant Loan set up and monitoring defaults Vesting Disconnect between sponsor and TPA Definition of Compensation Over Reliance on TPA 16

17 RIAs Value Add The fiduciary and co-fiduciary roles under 3(16), 3(21) and 3(38) have been great for the industry Governance roles/committee Structures Investment expertise/risk management Compliance with 408(b)2 Meeting minutes 17

18 RIAs bringing more value Involvement with the audit Timing and progress Help setting Client expectations Auditor Selection Recognizing the audit can help deepen relationships Audit findings communicated and how to help resolve with TPA or other Auditors can be a good referral network (both ways) 18

19 Audit Considerations for RIA Obtain the Management Letter issued 3(16) fiduciaries identifies risk areas to fiduciary Connect auditor with TPA Work together to recognize/resolve issues Eases work for client More efficient process 19

20 In Conclusion Understand audit requirements Help set client expectations Audits can be accomplished in a quality manner efficiently that does not get dragged out when there is client organization and responsiveness 20

21 Questions? Kris Tveit, Principal CLAconnect.com linkedin.com/company/ cliftonlarsonallen facebook.com/ cliftonlarsonallen twitter.com/claconnect 21