Selecting an auditor for an ERISA plan is one of those fiduciary responsibilities which has been a continuing concern of the Department of Labor (“DOL”).
At a June 25, 2019 meeting of the DOL’s ERISA Advisory Council, James Haubrock of the American Institute of CPAs responded to the Council’s request for recommendations on how the DOL could help Plan Administrators improve the process of selecting an auditor. You can read Mr. Haubrock’s testimony here which provides valuable recommendations.
But I’ll approach the auditor selection process from anther and more basic direction. If you are a plan sponsor with that fiduciary responsibility, here are a few mistakes to avoid:
- Don’t go through a competitive bidding process, but automatically go with your corporate auditor. Employee benefit plan auditing is a specialized field, and many otherwise capable accounting firms don’t have the necessary experience.
- Always select the one with the lowest price. While cost is an important factor, it should not be the only reason an auditor is hired. Sometimes the old adage is true, “you get what you pay for.”
- Don’t ask what training your auditors receive and what continuing education they get. Consider whether they are involved with the Employee Benefit Plan Audit Quality Center at the AICPA.
- Don’t be concerned about continuity of your audit team. Accounting firms, like all firms, have employee turnover. You don’t want to be charged for “training” a new plan auditor every year.
Your fiduciary responsibilities don’t end after the selection process. You also have a duty to monitor. The law does not permit the Department of Labor (DoL) to take direct enforcement action against the plan auditor for a “bad audit”, i.e., substandard work.
The DOL can, however, take enforcement action against the Plan Administrator, the person who engages a plan auditor, by imposing civil penalties. An experienced ERISA auditor is good insurance for you to meet your fiduciary responsibility, and to have a better managed retirement plan.
Picture credit. CanStockPhoto.