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The Roles Plan Professionals Play In Effective Payroll Audit Programs

The Roles Plan Professionals Play In Effective Payroll Audit Programs

Fund payroll audit programs are most successful when collection counsel, the payroll auditor and the plan administrator work smoothly together.  In this article we will briefly summarize the roles of the professionals and discuss best practices in operating and managing an effective payroll audit program.

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Collection Counsel’s Responsibilities

Collection counsel is responsible for working with employers who have not complied with trust fund collection procedures.  In addition to working directly with the plan administrator to facilitate collection of delinquent or late contributions, collection counsel also ensures employer compliance with fund payroll audit policies and procedures.  For example, the payroll auditor will refer employers to counsel for refusing audit entry or withholding documents required to conduct testing.  In most cases, collection counsel is able to get an employer to comply; however, an employer may continue to refuse, requiring formal legal action.  Finally, the plan administrator can refer an employer to counsel for failure to pay amounts due resulting from a payroll audit. 

Payroll Auditor’s Responsibilities

The payroll auditor is responsible for testing the employer’s records to determine whether it has properly remitted contributions to the trust.  Procedures vary among trusts but generally the plan administrator submits documentation to the payroll auditor, including employer work history reports, collective bargaining agreements and other information to facilitate the testing process.  Both the plan administrator and payroll auditor refer employers refusing to comply with fund policies to counsel for assistance with audit access or obtaining required records.  The payroll auditor sends completed payroll audits to the plan administrator.

Plan Administrator’s Responsibilities

The plan administrator’s role in the payroll audit process begins with furnishing employer information to the payroll auditor and finishes with receiving the final report and, if necessary, managing the collection of discrepancies found during the payroll audit.  The plan administrator is the custodian of the trust records and provides contribution histories, collective bargaining agreements and other pertinent agreements, and additional information needed to effectively and efficiently test contributing employers.  The plan administrator receives the final payroll audit report and if necessary works directly with the employer to resolve issues noted in the report.  If the report notes underpayments, the plan administrator will apply fund collection procedures.  As with monthly contribution delinquencies, the plan administrator will refer employers not complying with fund collection procedures to collection counsel.  

Communicating with Trustees

Plan trustees are ultimately responsible for collection of contributions.  Trustees should expect plan professionals to communicate the status of all collection efforts, including monthly delinquencies and the status of the payroll audit program, during regularly scheduled trustee meetings.  Effective payroll audit programs include considerable coordination among the professionals to keep trustees updated clearly and concisely.  Below are examples of the types of information each professional provides to the payroll audit program:

Collection counsel

  • Update regarding employers referred from payroll auditor

  • Update regarding employers referred from plan administrator for collection proceedings

Payroll auditor

  • Employers referred to collection counsel

  • Completed reports sent to the plan administrator

  • Status of ongoing testing

Plan administrator

  • Employers referred to collection counsel for collection proceedings

  • Status of underpayment collections

  • Employer appeals of payroll audit findings

Conclusion

Coordination of plan professionals is critical to the success of a fund’s payroll audit program.  Collection counsel, the plan administrator, and the payroll auditor should work as a team to see that the fund’s payroll audit program effectively ensures employers are properly contributing to the fund and that discrepancies identified through payroll audits are processed, collected, and applied to participant accounts as efficiently as possible.   By understanding the basic responsibilities of each of the parties, trustees can more effectively manage their payroll audit program.

Rachelle Hislop is a payroll compliance senior manager in Lindquist LLP's San Ramon office. She has more than 20 years of experience in the employee benefit plan sector, including payroll compliance testing and plan administration.  She currently manages payroll compliance programs for 18 trust funds. Rachelle is a graduate of the University of California, Berkeley.

Our firm provides the information in this e-newsletter for general guidance only.  It does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind.  The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.  Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.  Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer.  The information is provided "as is," with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.

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