(b)lines Ask the Experts – Improving the Plan Audit Experience

March 29, 2011 (PLANSPONSOR (b)lines) – “We are a large ERISA 403(b) plan sponsor and our experience with our very first 5500 plan audit for the 2009 play year was not a positive one, to say the least. Are there any actions we can take to improve upon the experience this year?”

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:    

This is a particularly timely question, since, for calendar year plan sponsors, the time to prepare for the 2010 audit is now! Of course we are not auditors here at Ask the Experts, so you should inquire of your auditor as to any action steps you can take in your particular situation in order to ensure a smooth audit process this time around.   

However, in general, here are some possible action items: 

  1. Conduct a “lessons learned” meeting with the  auditor and the plan vendors to address any issues that arose in the 2009 audit and make certain that they do not recur in 2010. 
  2. If you have a consultant/adviser, look to them to quarterback the process of data exchange between the vendors and the auditor. Often, vendors providing the proper data to the auditor can be the most significant bottleneck and consultants have the benefit of having gone through this process with several of their clients and thus the experience of working with common areas of difficulty.  
  3. Review the representation letter that you provided to the auditor at their request; often, we find that these letters can identify trouble spots, or include representations that you as plan sponsor are making to the auditor that could be transferred to some other party, such as your plan vendor(s). We have also seen letters that request that the plan sponsor make representations that are not possible for the sponsor to make, so it might be helpful to arrange for your outside ERISA 403(b) counsel to review the letter as well, if they have not done so already.  
  4. If you have multiple plans/vendors consider consolidation. Though this action will not improve the 2010 audit process, it will dramatically reduce the work involved in future audits, as well as many additional administrative burdens related to such structures (e.g. the transactional coordination/information sharing between vendors required by the final 403(b) regulations).  


The Experts wish you the best of luck with your 2010 audit process!  


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.