As all trustees know, gathering and protecting benefit plan assets are key fiduciary duties owed to participants. The Employee Retirement Income Security Act of 1974 (ERISA) requires plan trustees to collect all contributions due to the fund. Under ERISA, delinquent contributions are considered a prohibited advance of credit to a party-in-interest (contributing employer).
However, recognizing that all plans regularly face the challenge of collecting delinquent contributions, the U.S. Department of Labor (DOL) issued Prohibited Transaction Class Exemption 76-1, which exempts the extension, settlement, or non-collection of delinquent contributions from being considered prohibited--provided that the plan makes a reasonable, systematic, and diligent effort to collect the contributions. Compliance audits fulfill this condition of the class exemption.
A compliance audit is a review of certain employer records in order to determine whether the employer’s contributions are in compliance with the terms of the collective bargaining agreement and the plan’s governing trust document. Having a compliance audit program in place means that the plan trustees can:
At Legacy Professionals LLP our compliance audits begin with a detailed understanding of the plan’s collective bargaining agreements. Our compliance auditors’ next step is to thoroughly examine contributing employers’ payroll, tax, and disbursement records. In some cases, it is necessary to examine corporate tax returns and general ledgers.
Several benefit plans have further requested that we look for the existence of related companies that were established to avoid payment of contributions or to conceal nonunion employees performing covered work.
We have a staff of over 25 professionals in three offices dedicated solely to conducting compliance audits. Overseen by partner Bruce A. Pavlik, CPA, the compliance audit department is managed by Jim Kemperas, Chris Kogut, Mike Scrementi, Jim Lamont, and Nathan Grochow.
Feel free to contact us if you have any questions or need any additional information on compliance audit services.
By Jim Kemperas and Chris Kogut, Compliance Audit Senior Managers, jkemperas@legacycpas.com