Each year, the Internal Revenue Service and the Department of Labor conduct audits to ensure that employee benefit plans comply with government regulations. While many audits are selected randomly, certain circumstances increase your risk of being audited. If you’re a plan sponsor, it’s essential that you understand the various audit triggers for employee benefit plans.
Here are the top audit triggers that all employee benefit plan sponsors need to know about.
- Annual filing requirement: Most employee benefit plans are required to file Form 5500. This form provides the IRS and the DOL with information about the plan’s operation and compliance with government regulations. In general, only plans that cover 100 or fewer participants are exempt from filing a Form 5500.
- Plan size: The larger the plan, the greater its risk of being audited. This is because the government has established certain threshold requirements for EBPs based on their total assets and the number of participants.
- Material changes to the plan: If your plan undergoes any significant changes to its structure or operations during the year, you may be subject to an audit – examples include a merger or acquisition, or modifications to the plan’s eligibility requirements.
- Compliance issues: Plans and/or sponsors deemed non-compliant with government regulations may be required to undergo an audit as part of a corrective action plan.
- Special Requests: Lastly, the government may conduct a special request audit if it receives information or complaints about a plan sponsor. This could involve an investigation into the plan’s management practices, financial statements, or compliance review.
While these are some of the IRS and DOL audit triggers, this is not a comprehensive list. Some other events or conditions may also trigger an audit. After all, audits are an expected part of having an employee benefits plan. It’s always better to be prepared than try to avoid them.
The best decision is to partner with a firm that understands the complexities of employee benefits plans and helps you remain compliant with government regulations. While they might not be able to help you reduce the chances of being audited, they can certainly keep your company’s plan’s finances healthy.
As experts in employee benefit plans, the Boris Benic and Associates employee benefits team delivers the advice, insight, and guidance you need for your current and future business activities. Our culture allows us to provide a collaborative, hands-on approach, adding value to your company and results that help you succeed. Let Boris Benic and Associates assess your situation and determine the best way to proceed. Anyone can commit. We will deliver!