"improved" audit questions

[K2retire]

We are the TPA for a large plan that has changed audit firms due to poor quality audits of the prior firm. The new firm is clearly performing a much more thorough audit, but they have asked for some information that seems both impossible to calculate and completely unnecessary (at least to me).

They have asked the plan sponsor to calculate the number of hours that each employee has devoted to working on the plan and then calculate the dollar value of that time including both salary and benefits for each person.

Is that a common or reasonable request?

[GMK]

It doesn't sound common or reasonable to me. If we got such a request for the plans we sponsor, we'd ask the auditor why they need this information.

Unless the employees who work on the plan are paid from plan assets, what's the point of having this (inaccurate) estimate of time and dollars spent by the sponsor?

[hr for me]

I have to agree that I would ask the purpose of the calculation before performing it. That said, this is a calculation I do at the beginning of each year (once we have benefits/elections completed) for every employee regardless of job duties (i.e not just HR/benefits people) so that our BOD/CEO can understand the full cost of each employee, especially in regards to consistency of overall pay/benefits. We also use it for insurance purposes when we have to charge back time for repairs/work done internally rather than third party. So I would say it is semi-common to track such things in some industries.

That said, I agree with GMK in the question of whether the employer is trying to deduct employee work costs as plan expenses? If so, then yes, I would say this backup is needed to justify the expense as reasonable. Although I don't know of any employers that did so!

[david rigby]

Very unusual request. Is the requested information related to the TPA fee? any other fee?

If not, ask the auditor for some documentation why the requested items are relevant.

BTW, it's pretty common for benefit plan audits to have some of the "newest" employees of the audit firm, so consider the possibility that someone is just following a checklist, whether or not it has a bearing on the particular situation.

[ESOP Guy]

Are they trying to apply incorrectly some of the Sch C fee disclosure rules?

I quote from the Sch C instructions:

You must enter the information required for each person who
rendered services to or had transactions with the plan and
who received $5,000 or more in total direct or indirect
compensation in connection with services rendered to the
plan or the person’s position with the plan during the plan
year.

I would call it a bad reading but I could see how someone might read this such they needed that information. To me the "person" paid is the TPA firm but they could be reading the word person more literal.

[GMK]

Good call, ESOP Guy. That sounds right.

And isn't this aimed at service providers who get more than $5k (I haven't looked it up), not about the sponsor's employees?