Fluctuating DC Plan Contribution Patterns Red Flag for DOL, ERISA audit


At a TPSU program conducted at the University of Pennsylvania, CPA and ERISA audit specialist Maria Hurd outlines some red flags on timing of contributions which is one of the biggest issues found by DOL auditors.

Contributions to employee defined contribution (DC) plans must be made as soon as reasonably possible. Issues occur when companies sponsoring a DC plan creates deviates from the pattern of when they make contributions.

There are acceptable exceptions which do not need to be reported to stay out of trouble including a record keeper change, emergency absence by a key employee or some other explainable event. Otherwise, the assumption might be that the company is using the contributions as an authorized loan which is a prohibited transaction.

All plans with 100 participants (which means eligible employees) must conduct an audit – many make the mistake of using the CPA firm that does their taxes or other accounting work. Last year alone, the DOL had found significant deficiencies in 40% of the audits they reviewed which, to the DOL’s Chief Accountant, “…both jeopardizes plan assets and can result in significant civil penalties being imposed on the plan administrator by the DOL.”

So how do you know if your auditor is qualified? Here are some clues courtesy of the DOL:

  • The number of employee benefit plans the CPA audits each year, including the types of plans;
  • The extent of specific annual training the CPA received in auditing plans;
  • The status of the CPA’s license with the applicable state board of accountancy;
  • Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to a state board of accountancy or the American Institute of CPA’s for investigation; and
  • Whether or not your CPA’s employee benefit plan audit work has recently been reviewed by another CPA (this is called a “Peer Review”) and, if so whether such review resulted in negative findings.

Maria Hurd notes that 95% of CPAs conducting an audit work with less than 25 plans and those with one or two plans are responsible for 75% of the deficiencies found by the DOL. And a good auditor will not just flag problems, like erratic contribution schedules, they will work with their clients to fix them.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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