The U.S. Department of Labor’sSecurity Administration (EBSA) has uncovered “serious issues” with the quality of plan audits performed by certified public accountants.
EBSA found that 39% of the audits contained major deficiencies, putting $653 billion and 22.5 million plan participants and beneficiaries at risk.
Audits are required by law to ensure that benefit plans are being responsibly run from a fiduciary standpoint. Every year, more than 7,300 licensed certified public accountants nationwide audit more than 81,000.
Many CPAs, EBSA found, aren’t qualified to audit complex benefit plans. Confusing and contradictory regulations complicate the process of conducting audits.
The DOL has proposed legislation to fix the problem. “The existing patchwork of regulations and rules needs to be overhauled and a meaningful enforcement mechanism needs to be created,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi.
An EBSA report urges Congress to amend the Employee Retirement Income Security Act (ERISA) definition of “qualified public accountant” to include additional requirements and qualifications necessary to ensure the quality of plan audits.
Under the proposal, the Secretary of Labor would be authorized to issue regulations concerning the qualification requirements.
The report suggests amending ERISA to give the Secretary of Labor authority to establish accounting principles and audit standards to protect the integrity of employee benefit plans and the benefit security of participants and beneficiaries.