There are many variables that factor into a payroll audit. These range from the classification of the employee (i.e., full-time, part-time, independent contractor) to what benefits the employer offers and the payroll period involved (i.e., weekly, bimonthly, etc.). There are, however, best practices for all payroll audits especially when collective bargaining agreements in multiemployer plans are involved. The primary reason multiemployer plans fail Department of Labor investigation is because payroll audits are not conducted at all or not conducted properly.
Best Practices for Multiemployer Plan Payroll Audits
Where collective bargaining agreements are involved, it is essential that the auditor obtain and review copies of collective bargaining agreements and the benefit plan’s governing documents to ascertain the method of contributions. The auditor will obtain all payroll records from contributing employers and, whether conducted in-house or onsite, will conduct a thorough review of each year’s records and each plan member for whom contributions were made. The focus will be on determining if a plan is receiving the proper employer contribution and has complete and accurate work history for each plan participant. It is the role of the payroll auditor to assist plan trustees demonstrate their due diligence by conducting a multi-employer plan audit.
The Questions Trustees Must Ask Themselves
When it comes to payroll auditing, plan trustees and administrators must make some important decisions. They must determine if they want to use internal or external payroll auditors. By selecting an independent, third party to review the employer contributions, record the findings of their review and work to improve the accuracy of contributions, they are demonstrating a strong commitment to their due diligences.
Another decision to consider is how frequently their plan’s contributing employers should be audited and how best to prevent and collect delinquent employer contributions. An independent auditor can guide the plan trustees and administrators by organizing payroll audit information, providing advice on how to manage uncooperative employers, and assisting with documentation should a collection case go to court.
Returning Contributions to the Multiemployer Plan
The best auditors of payroll in a multiemployer plan are highly detailed in their approach. They meticulously review every member for which contributions were made over a period from one year to five years. Their goal is to help assure that the plan meets its compliance requirements under the Employee Retirement Income Security Act of 1974 (ERISA).
Beyond meeting ERISA requirements, high quality payroll audit professionals can also recover large sums of money in contributions back to their clients. A qualified and thorough auditor has the potential to recover upwards of several million dollars over a single five year period; a considerable amount that may have been lost without the audit being performed.