Last fall I had the opportunity, along with a few Foundation members, to meet with Ian Dingwall, Chief Accountant for the Department of Labor’s Employee Benefits Security Administration (EBSA). Mr. Dingwall’s team is responsible for making sure employee benefit plans are operating in compliance with ERISA and its regulatory guidance. Mr. Dingwall told us in no uncertain terms that the No. 1 reason multiemployer plans fail DOL scrutiny is because payroll audits are not performed. Not just performed incorrectly—but not performed at all.


Multiemployer plan trustees have a fiduciary duty under ERISA to make sure the fund is receiving all employer contributions that are due, based on participants’ hours worked. This means they must follow up when employers neglect to send their contributions on time (in other words, when they’re delinquent). This also means trustees need to make sure that the correct amounts are received. If trustees neglect this fiduciary responsibility, they can be personally liable. They help fulfill this duty by having a payroll audit performed by a knowledgeable and experienced auditor.

So, what is a payroll audit?

A payroll audit is an examination of the records of a contributing employer in a multiemployer plan to determine whether the employer has reported all of the hours or wages that a collective bargaining agreement (CBA) requires be reported. This ensures the right contribution amount has been sent to the fund. If an employer has not reported all (or any) of the hours or wages, the payroll audit shows the contribution amounts that are lacking or delinquent. Sometimes an employer may pay too much—A payroll audit can uncover overpayments too.

[Related: Payroll Auditing: A Guide for Multiemployer Plans]

Experts and the DOL recommend that multiemployer trust funds have a detailed, written collection policy for trustees, administrative staff and plan advisors to follow. This policy should state how the payroll audit will be conducted—its form and content—and when. For example, some funds spell out that payroll audits are done on a fixed cycle, such as every three to four years. However, some contributing employers are never (or rarely) delinquent in sending in their contribution amounts, while other employers may be habitually late. A multiemployer fund’s collection policy can call for more frequent payroll audits of delinquent employers.

[Related: Collection Procedures Institute]

The policy can also indicate which employer records will be examined. An auditor often looks at more than just an employer’s payroll records. He or she also reviews cash receipts, disbursement records, financial statements, income tax returns and the general ledger.

Lastly, the policy should include an appeals process for contributing employers, giving them the chance to offer additional and final evidence that a worker is not covered by the CBA and therefore shouldn’t be reported and to dispute any penalties that may have been imposed for late contributions.

A board of trustees has many decisions to make regarding payroll audits:

  • Which employers should be audited?
  • How frequently should employers be audited?
  • Should the audit be done internally using plan staff or externally?
    • If externally, will a certified public accountant (CPA) firm be used? What should a board look for when selecting a CPA firm?
    • Alternatively, will a non-CPA firm be used? If yes, the board should make sure the firm has the same standards and follows the same procedures as a CPA firm.
  • Will contributing employers that fail to cooperate with a payroll auditor suffer consequences? If yes, what will those be?
  • How often should the payroll audit policy be reviewed?

The DOL strongly recommends that all multiemployer funds conduct regular payroll audits. Here’s why:

  • Payroll audits
    • Make money for the plan
    • Help fulfill trustee responsibilities—see above—AND show trustees are doing their best to collect all contributions due to the fund
    • Help trustees avoid personal liability
    • Can help the plan pass a DOL audit.

The Foundation has created a new Payroll Audit web page to help you more quickly find the resources you need on this topic. Check it out and help your plan work more effectively.

Julie Stich, CEBS
Director, Research at the International Foundation

Julie Stich, CEBS

Director, Research at the International Foundation

Favorite Foundation service/product: A tie between our research reports and the personalized research service!

Benefits related topics she’ll happily discuss: Issues involving women in retirement, ACA, innovative benefits, trends, communicating the value of benefits, work/life benefits and “fuzzy” benefits.

Favorite Foundation conference/event moment: Listening to Eric Greitens’ keynote at the 2012 US AC. Also, really likes being in a booth at whichever conference, and chatting with members.

Personal Insight: A history buff, Julie enjoys traveling to major U.S. landmarks. She is also a life-long Trekker, and will correct you if you mistakenly call her a “Trekkie.”  

1 Comment

  1. gary young

    I am concerned mostly with the fact that my company has been bought and sold so many times over the last 30 years i dont think they could keep anything strait

Comments are closed.

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