While cost is always a factor with any business transaction, the cost must provide the expected value. Therefore, a 401(k) audit performed by a qualified and competent auditor like LSL can reveal that value.
It is a given the audit is required to comply with the reporting requirements of the Department of Labor for those plans with over 100 participants. But the “expected” value of the audit should be in knowing the plan is operating effectively to maximize the benefits to both the participants and the company.
The annual audit should benefit the company by providing comfort that the plan is operating in compliance with the plan document, and with company policies and procedures. The audit will not only help to avoid penalties, but will uncover potential problems and suggest improvements to existing operational controls. For example, is the periodic evaluation of investment performance and the education of employees properly documented. Controls need to be evaluated, and we have found instances where employee deferral changes made online were not processed by the payroll provider. Is something broken or not “up to par” in your plan.
The audit should also benefit the participants by enhancing the health of the plan. This comes in various ways. One is the interaction participants can have with the plan provider such as Transamerica, Fidelity and others. The right provide should have proper controls and enable participants to engage face to face, over the phone, online and even through mobile applications that personalize the savings experience. A good auditor has connections with various providers to assist with regular “benchmarking analysis” to see if the current provider is offering the healthiest plan options and costs. These steps can help increase the savings rates for employees, and isn’t that what the company wants from its plan and for its employees?
In conclusion, an audit is much more than it used to be. A qualified auditor should offer value in reducing employer risk and potential liability, and also improvements in employee satisfaction and participation.
For more information, please contact Brea Partner, Mike Mangold, at (714) 672-0022.
Mike specializes in attest and audit services for privately held businesses across a variety of industries. His clients range from manufacturers and auto dealerships to service firms, wholesalers and distributors. Mike also oversees audits of 401(k) benefit plans and is a peer reviewer for the AICPA Peer Review Program administered by the California Society of Certified Public Accountants.
You can reach Mike at 714-672-0022.
Read Mike’s full bio.