Even if you follow all the laws, there’s no telling when you might risk an IRS inspection. But the real question is, how can you prevent it?
Any company would prefer to avoid having the IRS suspect them of non-compliance. When you get an employee benefit plan audit, it strains your company by using up your resources.
We’ve put together a brief guide to highlight what you should look out for if you want to prevent an audit. Let’s start!
Table of Contents
Know How the IRS Examines Employee Plans
The IRS has a program that focuses on monitoring an employee benefit plan to ensure it complies with its requirements.
At the same time, it looks into whether your company provides employees with promised benefits. It includes retirement plans, health plans, and more. In a way, it safeguards or improves those plans.
If the IRS detects your company fails to comply, they can give you penalties. But before that, they conduct an examination process.
Usually, you get a notification about it, so it doesn’t happen out of the blue. Nonetheless, it helps to know more details about the process to have time to prepare.
Keep All Documents Updated and Compliant
Most compliance deficiencies involve employee benefit plan documents. You should practice keeping them updated to maintain regulatory compliance.
That means being wary of any new regulations and making sure your company implements those changes ASAP. It also helps to check for added rules every now and then to be sure you don’t overlook them.
In addition to this, you should also be sure all documents are compliant, with and without the new guidelines. This will make adjustments easier to complete and help you prevent an audit.
Do a Self-Audit to Ensure Consistency
Errors and corrections with an audit are due to several reasons. It could be a system change, reorganization, and more.
Consider conducting a self-audit to ensure your employee plans are consistent. A self-audit lets you find issues and correct them sooner. As a result, it protects you from compliance breaches.
Have a Team Dedicated to Employee Benefit Plans
Many experts suggest having a team or advisor dedicated to making sure you follow IRS standards. This way, you can lower the chances of an employee benefit plan audit even more. The following are a few things they will be responsible for:
- Auditing assistance
- Monitoring defined contribution plans
- Monitoring defined benefit plans
- Checking compliance
- Making regular updates
- Access to legal and HR hotlines
Avoid Mistakes But Be Wary About Them
The key to preventing an employee benefit plan audit is to avoid mistakes in general. But sometimes, it happens inevitably.
There are instances where you can correct those mistakes, so it’s best to be wary of them instead. You can check the voluntary fiduciary correction program to correct those.
This way, it reduces fines or clears your company of any penalties caused by the audit.
Prevent an Employee Benefit Plan Audit With These Tips
An employee benefit plan audit is a complex issue, but it’s something you can prevent. Remember to keep an eye out for your documents to ensure you stay in compliance at all times!
Browse our blog for more tips on these topics.
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