Why CFOs Must Steer Employee Benefit Plan Audits to Avoid Fines, Penalties

Employee benefit plan audits are due October 16, 2023, and CFOs often have the most vital role in ensuring a smooth audit and avoiding fines and penalties. By providing third-party auditors with plan data and access to trustee technology platforms, it creates a more complete report for the Department of Labor (DOL) on the plan and reduced the chance of post-audit inquiries and enforcement actions.

According to Partner Stacy Farber, "The CFO is often the plan administrator, so they have the fiduciary responsibility to ensure that all of this is done correctly. If DOL comes in, they can go into much more detail than we can as the auditors," which can result in fines, penalties, interest, and the potential loss of tax-exempt status.

Human resources is often involved, but Farber's experience shows audits "tend to move a little bit faster because the CFO wants it done, so they’ll tend to drive those people to get us what we need faster than when the CFO is not involved." This includes granting auditors direct access to technology systems run by plan trustees and avoiding delays with company staff due to information retrieval requests.

As for the key areas most issues occur, Farber states it typically happens with inconsistent remittances, the lack of timely payroll system updates when employees change their deferral percent or amount, and incorrect matching contributions. In addition, CFOs should regularly review plan transaction reports to proactively address issues. "It is helpful to review the transactions occasionally," as part of monthly or quarterly reports from plan trustees, she said. "It’s a good idea, just to even look over them and make sure that somebody’s maintaining a remittance schedule and reconciling that periodically, because that’s going to help identify issues before the audit."

Read the full interview published by CFO Dive.