Are there service providers who do operational audits to ascertain if

[Guest Lisa Flagg]

Are there service providers who do operational audits to ascertain if plans are being operated in a way that provides for continued qualification under IRS rules?

If so, what kind of report would be furnished to the client?

Thanks for any responses.

[Guest]

Absolutely, I worked for a TPA/consulting firm in the past that provided such review and issued such reports. Generally the reports are similar to legal opinions, with all the disclaimers, that the plan opertionally is in compliance or note the areas that need to be corrected.

[Guest]

I know of several law firms that do "compliance audits," to advise the plan sponsor whether the plan is in compliance with DOL and IRS (and PBGC, if applicable) requirements. The reports may take many forms, but if the plan sponsor wishes (and pays for the audit itself, rather than out of plan assets), the report can be privileged and confidential. The IRS "Best Practices Memo" on the closing agreement program states that agents should NOT request copies of a plan sponsor's compliance audit reports, but that the taxpayer "may always offer to share . . . part or all of a compliance audit report in defense of a position or to demonstrate compliance . . . ." So, if properly handled, a compliance audit should help, and not hurt, the plan sponsor. I'll be glad to give you the names of some firms that do compliance audits--e-mail me a note if you're interested. (There are undoubtedly other organizations that do compliance audits, I just don't know who they are.)

[Moe Howard]

If a CPA performs the compliance testing and issues the report to the plan or plan sponsor.... then the report is known as "an agreed upon procedures report". Also, findings of errors in the plan's operation and recommendations to correct those errors will be stated in a "management letter" report from the CPA to the plan or to the plan sponsor.

If a non-CPA performs the compliance testing, then he can name his report anything he wants to call it.

[Kirk Maldonado]

You should really consider using a law firm to conduct the "fiduciary" audit. At least then you have a chance of claiming the attorney-client privilege. If you directly contract with an accountant, I don't believe that the privilege applies.

In case you are wondering, I do not conduct any fiduciary audits, so I don't have a conflict of interest here.

[Guest dflin]

Moe is correct that CPA's must issue their report in the form of "agreed upon procedures." Kirk's suggestion is valid based on a compliance review that I performed recently. The plan sponsor's attorney (not the plan sponsor) engaged my firm to perform the review. As such, my report was addressed and delivered to the attorney.

The attorney advised that this arrangement would preserve the attorney-client privilege. Anybody else?

[Kirk Maldonado]

I agree with dflin. That is an alternative way of performing a compliance review that preserves the attorney-client privilege.