Common EBP Compliance Mistakes and How to Avoid Them

An employee benefit plan (EBP) audit is a crucial undertaking with many complex steps. The primary objective of an EBP audit is to verify that a company’s current benefits plan can effectively pay its existing staff. For every employer, EBP audits are vital when maintaining employee benefits compliance, sufficiently protecting workers and keeping accurate records. 

Many factors can increase the complexity of employee benefit plan audits, however. Companies must adhere to multiple guidelines and mandates for EBP compliance, staying current on employee benefits compliance updates from the following sources:

• U.S. Department of Labor (DOL): The federal government requires that all businesses provide social security, medicare, health insurance, workers’ compensation, unemployment insurance and medical and family leave. 
• Internal Revenue Service (IRS): Offering benefits has tax implications, so companies must abide by IRS regulations. Benefits such as life insurance, employee discounts and tuition assistance are all taxable. 
• State and federal regulations: In some states, businesses must provide additional benefits aside from what the DOL mandates. 
• Internal policy: A company’s internal protocols may call for a specific process when handling employee benefits. 

Four common EBP audit challenges

During an EBP audit, a professional auditor must carefully review a company’s financial statements to detect possible red flags. If there are any warning signs, they may mean that accidental errors or fraudulent filings have occurred. The preparer needs to report these findings for further investigation.

An EBP audit aims to achieve three main goals, including the following:

1. Ensure that the employer acts in the best interest of the plan’s participants
2. Assess the employer’s procedures for managing the EBP
3. Identify any vulnerable areas where fraud or error may potentially occur

Unfortunately, poor planning, inaccurate data, insufficient files and inefficient workflow management may all contribute to a cumbersome and time-consuming audit process, as we will now explore in greater detail.

Insufficient planning

Thorough planning is the most crucial step when conducting employee benefit plan audits. First and foremost, you must generate an employee benefits compliance checklist (small employers and large ones alike). It is essential to communicate with the employer during the planning phase of an audit to clarify your expectations and emphasize the importance of the audit. To do this effectively, you must create a clear roadmap outlining the information you need, how you will examine it and the reasons why it is significant. 

Sit down with the plan sponsors and explain each employee benefits compliance requirement in detail. Helping your clients understand these items could prevent confusion and give them insights that could be helpful during your audit process. 

Poor data-gathering processes

Improper data-gathering protocols are common mistakes that affect employee benefit plan audits. EBP audits contain large amounts of highly sensitive data, though, so the accuracy of this information is crucial. Unfortunately, companies tend to store their data in various locations, which can lead to missing information, incomplete transfers or data corruption when information is moved from different systems. 

Bad data wastes a great deal of time. Your clients and staff may have to spend hours sifting through spreadsheets and databases to gather, analyze and export the required information. If there are inaccuracies or missing data, this process may even have to be repeated, causing further delays and frustration.

Inferior documentation

Employee benefit plans involve significant documentation. Every record must be complete, error-free and up-to-date to be considered valid. Documents of each plan with any amendments, determination letters from the IRS, annual reports for the audit period and proof of fiduciary responsibility to plan participants are just a few of the documents your client will need to provide. 

When you are conducting an EBP audit, therefore, gathering information from various departments is necessary. Not every company conducts employee benefits compliance training for their staff members, though, so obtaining everything you need can be challenging when you are working with multiple staff members. 

Inadequate workflow management

Auditors are typically external agents and tend to disrupt the internal protocols within their clients’ companies. Most often, you are working with unfamiliar people within workflows and systems that are foreign to you, which can create a choppy auditing process. 

Even when walking into a perfectly organized company, conducting an EBP audit is challenging. It becomes even more complicated when team members are uncooperative or not working together. Each staff member is probably working with a system that makes the most sense to their role without considering how it will impact an EBP audit. 

Lastly, if everyone must be onsite for the preparation portion or to answer your questions as you begin to execute the audit, any absences could cost you valuable time.      

The solution: OnPoint EBP from Caseware

Caseware’s OnPoint EBP addresses the aforementioned pain points and many others to streamline the EBP auditing process. We have listened to your most common employee benefit compliance questions to design an efficient, cloud-based solution for you and your clients. 

With OnPoint EBP, you no longer need to rely on antiquated, paper-based EBP auditing systems. Say goodbye to spreadsheets and physical documents, as you can securely save all your important files in a central location in the cloud. 

We have designated tools to capture any changes made to records in real time, eliminating the need for back-and-forth exchanges with clients and their staff to determine if they have updated a document. 

Furthermore, automatic drafting of certain financial documents saves time and guarantees accuracy.

OnPoint’s integrated diagnostics tools inform you of any communications that require your attention. Also, if any member of the auditing team, at any point, chooses to divert from their designated path, you will be alerted about that as well. Keeping everyone on track will eliminate missteps and extra work while keeping the entire process running smoothly and efficiently. 

Because OnPoint EBP is cloud-based, you will no longer need everyone to be onsite during every audit phase. Your clients, their staff members and your team can easily stay safely digitally connected.Ensure your clients maintain their employee benefits plan compliance by learning more about Caseware OnPoint EBP today.