Preparing for your benefits plan audit

An accurate census greases the wheels to begin verification of a benefits plan.

What is a census? A census is a report typically completed from your payroll system for a specific time period that contains relevant data. The most common items found in a census are employee name, employee identification number, social security number, union member, non-union member, date of hire, date of birth, date of termination of employment, part-time employment status, full-time employment. status, gross salaries, 401(k) eligible salaries, bonuses, commissions, employee deferrals and employer contributions. There may be other data fields, depending on the specific provisions of the plan.

The period of the activity captured by the census depends on the end of the year of the plan. If the plan is a calendar year, the census will capture employee paycheck dates from January 1 through December 31. If the plan is a fiscal year, the census can take place from July 1 to June 30 for a year-end plan in June. .

The purpose of the census is to provide a complete population of the plan sponsor‘s employees. The best way to ensure that your census is complete is to reconcile the totals of the appropriate data fields with a government-filed form, such as Form W-3 (W-2 total page), for an end plan. calendar year showing total salaries and employee deferrals. Then compare it to the total salaries and deferrals of employees during the census. The total employee deferrals should also match the total employee deferrals on your plan’s contribution schedule report (discussed in our next blog), which is used to determine if contributions are being made to the plan on a timely basis.

What happens if the census does not agree with the total of a government form? Typically, the employee carry forward total can be found on the W-2 total page (box 12D) and compared to your census for calendar year-end plans. If you attempt to reconcile gross wages from the W-2 total page, that total will not appear in any of the boxes on this form. To remedy this, the data field in box 1 (salaries, tips, other remuneration) can be added per employee to the census and compared to the total page W-2. An overall reconciliation to total gross wages in Box 1 can also be displayed at the bottom of the census. Reconciling items may include adjustments made for GTL, 401(k), cafeteria plans, etc. If it doesn’t match, check and see if any corrections have been made to the W-2 total page (eg, Form W-2C).

As a best practice, the census should be created after the W-2 forms are completed to ensure that any year-end adjustments or corrections have been captured in your payroll report. Another interesting approach is to add compensation-type fields to the census that align with your plan document‘s provisions for defining compensation. For example, if your plan document excludes bonuses and your census shows the total per employee who received a bonus, it will be easier to verify the eligible compensation for your plan.

A close count can help kick-start your audit because it allows auditors to see who is potentially eligible to participate in the plan. The census also provides the participant data to select and test various provisions of your plan with a population deemed complete.

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