H2R CPA Blog

Understanding Your Employee Benefit Plan’s Governance, Compliance, and Audit Requirements

Employee benefit plans generally fall into one of three categories: single-employer plans, multiple-employer plans, and multiemployer plans. Each category has significant operational, regulatory, and audit implications.

  • Single-Employer – Sponsored and maintained by one employer for the benefit of its employees
  • Multiple-Employer – Covers employees of two or more unrelated employers that participate in a common plan arrangement but are not collectively bargained
  • Multiemployer – Established through collective bargaining agreements between one or more labor unions and multiple unrelated employers

The distinction among these plan types is important due to their unique governance structures, reporting requirements, and audit risks.

Single-Employer Plans

From an audit perspective, single-employer plans are generally the most straightforward because the sponsoring employer typically controls the plan’s administration, payroll records, participant data, and contribution processes. Plan sponsors are generally responsible for plan administration, compliance, and reporting requirements, often with the assistance of third-party service providers. The auditor’s procedures are generally focused on a single entity’s internal controls, payroll systems, and participant records.

Multiple-Employer Plans

Multiple-employer plans introduce additional audit considerations because several unrelated employers participate in the same plan. Although the plan operates as a single ERISA plan, participating employers may have varying payroll systems, contribution processes, and employee populations. As a result, consideration must be given to whether contributions received from participating employers are complete and accurate and whether participant data from multiple employers has been properly accumulated and maintained. In some arrangements, plan administration may involve pooled plan providers, professional employer organizations, or other third-party service providers. The involvement of multiple employers can increase the complexity of obtaining audit evidence and assessing compliance with applicable plan provisions.

Multiemployer Plans

Multiemployer plans are generally governed by a board of trustees consisting of both union and employer representatives and are funded through collectively bargained employer contributions. Because participants may work for multiple contributing employers during the year while remaining in the same plan, consideration must be given to contribution reporting, monitoring, and collection across numerous employers. In addition, multiemployer plans often have specialized regulatory requirements and unique operational features that differ from traditional single-employer plans. The involvement of numerous contributing employers, extensive participant populations, collectively bargained contribution requirements, and trustee governance structures often results in increased audit complexity and additional information requests during the audit process.

Understanding whether a plan is single-employer, multiple-employer, or multiemployer can help plan sponsors and administrators better understand their governance responsibilities, compliance requirements, and audit implications. Because each plan structure presents unique operational and reporting considerations, identifying the plan type is an important first step in preparing for an efficient audit and maintaining compliance with ERISA requirements.

Reach Out to Learn More

H2R CPA provides audit and assurance services for a wide range of employee benefit plans including 401(k), 403(b), Profit Sharing, and Employee Stock Ownership Plans (ESOPs). If you have questions about maintaining compliance for your employee benefit plan, reach out to the Accounting & Assurance Group at H2R CPA.

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