 Payroll Audit A payroll (compliance) audit is a review of the necessary books and records of an employer to determine the employer's proper compliance with the terms of the collective bargaining agreement and trust agreement applicable to the particular benefit fund. BENEFITS AND COMPLIANCE A payroll audit program provides major benefits. It enables trustees to determine whether the plan is receiving the proper amounts of employer contributions that are due. It also enables trustees to determine whether the plan has accurate and complete participant records. Finally, it serves as notice that the fund trustees are monitoring contribution collections. In order to issue an unqualified opinion, the fund's independent qualified accountant is required to perform procedures which sufficiently satisfy that participants have been properly contributed for, and the participant data and information required to be maintained by the fund to determine and provide benefits are complete, accurate and in agreement with employer records. Payroll audits are the most practical, reliable, and cost effective means by which the auditor can obtain this satisfaction. In addition, the payroll audits provide a basis upon which to determine the accuracy of the contribution income and contributions receivable reported by the fund. Payroll audits assist fund trustees in meeting their fiduciary responsibilities and provide the fund's independent qualified public accountant with the necessary evidence which to render an unqualified opinion on the fund financial statements. REQUIREMENTS AND RESPONSIBILITIES ERISA - Contributions are the most important source of revenue to most benefit funds. The trustees of any benefit fund are responsible for collecting all contributions that are due. This fiduciary responsibility under the Employee Retirement Income Security Act of 1974 (ERISA) establishes that a trustee allowing an employer to be delinquent in contributing to a benefit fund is not acting solely in the interest of, or for the exclusive purposes of providing benefits to participants. ERISA also states that a plan cannot lend money or extend credit to a party in interest such as contributing employers, as well as others. A delinquent contribution is considered an advance of credit and, therefore, a prohibited transaction. Trustees failing to carry out this fiduciary responsibility can be held personally liable under ERISA and ordered to make good all losses to a plan. They can even be removed from serving as a trustee. The Department of Labor's View - The Department of Labor (DOL) recognized that multiemployer benefit plans are unique and that contributions are established through contractual commitments between labor organizations and employers or their associations. The DOL also recognized that multiemployer benefit plans engage in many transactions that are long established, routine in nature and reasonable in their terms, but might be considered a prohibited transaction, such as the problems associated with contribution collections, delinquencies, employer bankruptcies and uncollectible contributions. As a result, the DOL issued Prohibited Transaction Class Exemption 76-1. This exemption essentially provides that the extension, settlement or noncollection of delinquent contributions will not be a prohibited transaction, if reasonable, systematic and diligent efforts are made to collect the contributions. It also provides that any agreement to collect a delinquency has to be reasonable under the circumstances and there has to be a written memorandum of the delinquency and its resolution. Contribution (Delinquency) Collection Policy - The best way to document that the trustees are making reasonable efforts to collect contributions, as required under Exemption 76-1, is to establish a contribution delinquency collection policy. This policy should meet the following minimum guidelines:
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