b'Random Payroll Audits from Multiemployer Funds Are They Really Necessary?Michael LedbetterThis article is being provided by MRCA for their Members that are signatory to union bargaining agreements that include Taft-Hartley multi-employer pension and hospitalization plans.Contractors frequently raise questions and complaints over the necessity or scope of random employer payroll audits. The process can be invasive and cause disruption to a contractors normal business operations. Additionally, large contractors may face multiple auditsbe scanned and provided electronically. You will need to from different plans each year. The purpose of this article ishave someone available to answer questions and supply to provide an overview of the process and answer questionsany additional information requested by the auditor. At the frequently raised by employers. conclusion of the initial process the auditor will typically What is the Reason for Employer Payroll Audits?conduct an exit interview and present the contractor with Plan fiduciaries have an obligation under ERISA to ensurea list of potential issues. The goal is to address these items employers are abiding by the terms of collective bargainingbefore a final report is issued. If there are problems, the agreements and contributing all monies owed to the fringecontractor will be contacted directly by the trustees or the benefit plans. If the fiduciaries fail to conduct payroll audits,plan administrator.the Department of Labor can reject the DOL Form 5500What Information is Typically Requested by the (Annual Report) and levy a fine of $1,100 per day. PlanAuditor? Keep in mind that the auditor has an obligation trustees can be held personally liable for violating theirto go beyond the standard payroll records and search fiduciary obligations. This obviously creates a strong incentivefor problems like independent contractors performing for plan fiduciaries to fulfill their collection obligations. bargaining unit work, improper subcontracting, employees What Right Does a Board Have to Audit My Records?being worked out of classification, etc. Auditors will request When an employer makes a contribution to a plan, it is boundthe documents they believe are most likely to uncover these by the terms of that plans trust document. Nearly every trustproblems, including: contribution reports, W-2s, state returns, document grants fiduciaries the right to audit an employersfederal returns, payroll journals, cash disbursements journal, records to determine compliance with the collectiveaccounts payable, 1099s, subcontracting information and/or bargaining agreement but regardless of the trust language,the general ledger.most court decisions recognize the authority of the trustees toWhat if I Object to an Auditors Request or Finding? conduct regular payroll audits. Any dispute concerning the audit process should be put in How Often Should Random Audits Be Conducted? Thewriting and sent to the administrator as soon as possible with plans auditor has some leeway in determining the number ofa copy to the employer trustees. Plan fiduciaries are almost audits to be conducted per year. However, AICPA guidelinesalways willing to work with contractors to resolve legitimate and the Department of Labor suggest that plans shoulddisputes. However, if a contractor refuses to cooperate or attempt to audit every employer within a 3-6 year window. provide records, the fund attorney will likely file an action in Are there Other Types of Employer Audits? In additionfederal court to force compliance. to the random program many plans will require audits ofIs More Information Available? If you have additional all new contractors during their first year of participationquestions about the audit process, contact the plan and those contractors who stop contributing to the plan.administrator. Nearly every fringe benefit plan maintains Also, if the fiduciaries have questions about an employersdetailed collection and audit policies.As a contractor you are contributions, they may request a for cause audit. entitled to a copy of these documents.Who Pays for the Employer Audits? In most casesRandom employer payroll audits are costly to plans and the plan itself will bear the costs of the audits (typicallyburdensome for contractors. Nonetheless, the DOL requires $1,500 to $2,500). However, if the audit reveals a materialthat plan fiduciaries maintain a regular auditing program.If underpayment from a contractor, the costs of the audit willyou have an additional questions about the audit process, become the responsibility of the contractor. please contact the Association Office.What Should I Expect During a Payroll Audit? TheMichael Ledbetter of Ledbetter, Parsi, Sollars, LLC, can be reached at auditor will contact your office and set a mutually agreeableledbetter@fringebenefitlaw.comMike serves as Fund Counsel to multi-time to visit your office to review a list of documents.employer Taft-Hartley Funds across the country. He is also a frequent Alternatively, the auditor may ask that several documentsspeaker for the International Foundation of Employee Benefits20 www.mrca.orgMidwest Roofer www.mrca.orgMidwest Roofer 20'