When your company grows, it will require some changes to the way you conduct business due to governing rules. Usually, if you have a hundred or more eligible participant employees for a pension benefit plan at the start of a new year, it’s required to submit under the federal law, financial audited statements. These should include their employee pension benefit plan. It can be submitted by filling their 5500 form every year.
However, with certain exceptions of this specific rule, you should consult your pension benefit advisor in connection with this plan.
These pension audit requirements will allow your Department of Labor to monitor whether benefit plans of the employees are operating according to government standards. Additionally, they will track whether these follow the outlined provisions of the relevant plan documents. These rules of auditing will apply to plans such as welfare, health, pension, 403(b), 401(k) and profit-sharing benefit plans.
Failure to file these documents properly may result in heavy fines and penalties every planned year. Therefore, it’s important for companies to remember the deadline date of the 31st of July, as well as the deadline extension date of the 15th of October for year-end plans.
How to go about tackling your employee pension benefit plan audits?
Here are some tips to do your planning process more efficient and easier.
First of all, you will need to understand all the provisions and also the adoption agreements in the plan documents. Without knowing and understanding all of the plan’s details, you won’t be able to know whether you comply with it.
Each plan’s files must be kept every year. This will make it easier to track the activity on the plan. Make sure to always include all pertinent documents, amendments, memos and minutes into the files.
You should schedule a specific meeting with every service provider, third-party administrators, plan custodians, auditors, as well as your internal staff that will be involved in the pension audits. Ensure that all of them know exactly what role they will fulfill in this process of auditing. Additionally, provide all information detail needed to create and provide a specific timeline for the delivery.
You can request from your auditors a specific planning letter with all the information they will need related to the audit, as well as the format it needs to be in. It will assist in maintaining efficiency with the process of auditing.
Delegate a specific person to keep track of all the information for auditing, which needs to come from different sources like finance departments and human resources. Which in turn needs to be sent to plan custodians and third-party providers.
Create a deadline for every source and ensure that the information will be recorded on its arrival. Where it’s possible, ensure that the information will be collected before the auditors arrive.
It’s important to understand what testing will be done by the auditors. Usually, auditors will look at things such as contributions from employees and employers, payroll records, investment results, payment for expenses, participant loans, distribution of benefits, and also the fulfillment of the plan’s administration.
You should compare financial statements to the 5500 forms in order to identify and also resolve all discrepancies before the audit starts.
Once auditing has started, you should request reports and updates daily on all items that are open, to be able to monitor the progress of the audit.
Information for individuals that want to plan their own pension
You don’t have to go through the process on your own. It will be wise to consult with a professional advisor and make sure you follow the conformity. Planning for your retirement will be a financial decision that is very important to make.
Once you have started with your retirement or pension plan, it’s important to audit or review it every year and make sure it stay on track. As time goes by circumstances may change such as personal situations, income, occupation, and goals.
Therefore, it’s important to do regular pension audits or reviews and make sure that your plan will grow with your needs.
To review your pension plan you should look at the following:
Make sure that you contribute to a pension fund that will cover your needs, and whether it will match your attitude to any risks.
How well does your fund perform?
Look for any other pension fund that might give you a better return on your money.
Know how much your fees are that you currently pay and what affect it has on your pension or retirement plan.