A 401(k) Audit Case Study
Compliance with ERISA is often a complicated process, particularly for growing companies with changing needs. This was the case when a prospective client called LitmanGerson about performing a 401(k) Plan (Plan) audit as required by ERISA. The audit requirement was triggered when the prospective client hired additional employees, which resulted in them surpassing the threshold of eligible participants.
In our meeting with the client’s CFO and HR director, we stressed LGA’s balanced and practical approach. We discussed with them the way in which we work with our clients and educate their staff members throughout the audit, encouraging frequent interactions, while still providing an affordable fee structure. All of this is done without compromising quality and independence. Our experience provides us with a keen understanding of the issues, and because of this, LGA’s rates are often below our larger competitors. In this case, our competitor provided a fee quote that was below industry standards, and the company decided to go with the competitor.
The prospective client contacted LGA three months later, inquiring if we were still interested in performing the audit. The auditor that had been selected was unwilling to educate the client’s staff and guide them through the process. At the completion of planning, the firm wanted to charge for a significant amount of time more than what was quoted. The firm’s original contract was impractical, and its scope lacked a broader, more balanced approach.
We accepted the opportunity to work with the client, but with a looming deadline, time was of the essence. We rolled up our sleeves and began to conduct the audit immediately. As expected, we encountered several common operational defects, such as untimely remittances of employee deferrals. We provided the guidance the company needed to quantify the issues and develop a plan to remedy the deficiencies by acceptable methods prescribed by laws and regulations. In spite of the obstacles, the client was able to implement the appropriate remedies and complete their filing with the Department of Labor and Internal Revenue Service on time.
The client could not have been more satisfied with our work; we provided them with the education and our final invoice which, as always, honored the original terms of the engagement. We have established the kind of trusting relationship with this company we hope to build with every client.