Written By Larry Beebe

Bond Beebe, Accountants & Advisors

P: 301.272.6025 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

I recently participated in a webcast for the AICPA on multiemployer plans.  One of the questions submitted by a participant but left unanswered, due to time, was a multipart question on payroll auditing.  Here is how I would have answered that question:

1. What have you found to be the most difficult aspect of payroll audits?

Often the most difficult decision a payroll auditor must make is deciding when to wrap up the audit.  Factors that should be considered in making this decision are:

1.       Is all testing complete?

2.       Has the scope of the audit been sufficiently expanded when errors have been discovered?

3.       Were all necessary records available for testing?

4.       Has the employer appropriately answered all of the auditor’s questions?

5.       From a cost-benefit relationship, should the audit continue?

I would like to know from the readers of this blog if there are other factors that should be considered in deciding whether to wrap up the audit?

2. How do you effectively and efficiently audit a contractor that may employ and report to multiple plans and jurisdictions?

Ask for copies of remittance reports for the other plans.  For any employees listed on those reports, the payroll auditor can eliminate testing.  The only exception would be in those situations where two crafts are claiming the same employees.

3. Do you often see special pay arrangements for union members in management positions and how do you clear those arrangements with the local union and related parties?

If you are a union member and are promoted to management, you are no longer a part of the bargaining unit, and should not be reported.

Written By Phil Vivirito

Bond Beebe, Accountants & Advisors

P: 301.272.6090 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

At times an employer’s response to an unreported employee being picked up on our audit report is” that person is retired”. The employer’s position is that since that person is retired and is already collecting a pension there is no need to report him. Upon hearing this from an employer the auditor should ask where that person retired from. If he is retired from an industry other than the one that he is currently working in and that pension is from a fund other than the one you are auditing for, then the person should be reported. He is just like any other employee working in a covered position. However if the person has retied and is collecting a pension from the fund you are doing the audit for, it is a different scenario. The audit will have to refer to the rules of the fund for its retirees returning to work in a covered position. There may be a cap on how many hours per month that the employer must report. He may have to be reported for all hours and have his pension suspended, or reduced by a certain amount based on how many hours he works.

Written By Larry Beebe

Bond Beebe, Accountants & Advisors

P: 301.272.6025 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Andy Staab is writing a series of articles for us on tips to payroll auditors when asked to testify in a deposition, trial or other legal proceeding.  The first two articles have been posted in the articles section of this blog.  Take time to read them and check later for the continuation of this series.

Successor clause, decertification, market recovery plan, union security, dues check off, working assessments... These are just some of the terminology that may be found in collective bargaining agreements. Some terminology in the collective bargaining agreement may affect the payroll audit and some may not. It’s a good idea for payroll auditors to be educated on the terminology that can be found in collective bargaining agreements. It will help the auditor know what relates to the payroll audit and what does not. How many times have we heard from an employer ‘in my CBA’? An auditor educated in this area can communicate intelligently with the employer on why or why not certain clauses in the CBA relate to the payroll audit.

Written by Andrew Staab

Rosene, Haugrud & Staab, Chartered

P: 651.227.6621 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Payroll Auditors should add “Part-time Litigation Witness” to their job descriptions, because there is always a possibility they will have to explain the document on which a Fund relies to collect from a delinquent employer.  Being a witness is more difficult that you think, and sometimes a deposition or a trial will have landmines waiting for a witness to trigger.  If properly prepared, the witness should avoid damage to the Fund and harm to the reputation. 

The article attached is the first in a series of entries on how one Fund Counsel views preparation of a payroll auditor for a deposition or a trial.  The idea was initially for one article to cover all the points, but so many ideas came out that it was too long for only one article.  The first article discusses preparation and tips before a deposition.

 payroll_auditors_as_witnesses_-_fund_counsels_perspective.pdf

Written by Larry Beebe
Bond Beebe, Accountants & Advisors
P: 301.272.6025 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

We are adding two new sections to our blog.  The first section will be questions and answers on payroll auditing.  We need your help.  Send us your questions.  You can also send the answer as well or we can solicit the editorial board for an answer to your question.

We are also adding a humor section.  Payroll auditing is a serious business but things happen, which in retrospect, are very funny – again we need your stories.

Please let us know when you send in a question (and answer) or a funny story whether we can use your name as the contributor of the story.  We want to give credit to those who help advance payroll auditing.

Written by Sarah Azimi Stone, Compliance Auditor
Bond Beebe, Accountants & Advisors
P: 301.272.6066 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

A recent payroll audit our firm worked on had some unusual aspects.  We were sent 20 boxes of records of truck tickets which had a bare minimum of information.  Our job was to calculate the hours worked for truck drivers and compare it to the hours reported.  The tickets might or might not show names, truck numbers and log-in or log-out times.

We needed to compile all of the information in a presentable manner which made sense to all parties involved. The course of action included reviewing every single ticket and inputting the available information in a spreadsheet.  Then we needed to determine how to interpret this data.  Several assumptions were made including an assumption that if a driver had a ticket, it would be assumed that he worked 8 hours for that day.  From this point we were able to compare the hours from the spreadsheets to the contributions reports and determine any discrepancies.

Written by Kurt Needles
Needles & Associates
P: 303.430.4225 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

One step we auditors always perform is determining when contributions are due to the fund, known as the “Trigger Point.” A Collective Bargaining Agreement (CBA) may have union clauses that will give the employer some type of probationary period on new hires. This applies to the employers’ rights to terminate or when an employee’s union status must be obtained. It does not, however, apply to the Trust funds contribution unless specifically addressed in the CBA Benefit Section. The payroll auditor needs to read these sections of the CBA prior to the visit. We keep a “cheat sheet” for each group that details the trigger points for each benefit in a family of funds; they may be different.

Also the CBA, the benefit section may discuss whether the contributions are to be based on hours worked or hours paid (sometimes the CBA will refer to the plan document for this definition). There is a difference. Hours paid would include vacation, sick, holiday, bereavement, and personal time. Contributions on hours worked would be just that, hours actually worked on the job. Some variations include straight time only, hours over 40 per week and ceilings on monthly or annual hours.

Written by Ron Chandler

Miller Kaplan Arase & Co., LLP

P: 818.769.2010 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Many Funds allow owners or shareholders of a business to participate in the Fund.  As the auditor, make sure that you have a full understanding of the particular Funds rules or requirements for their participation.  Many small companies find it easier and more cost effective to "be part of the union" Plan, but may not be eligible because of the Fund’s rules.  Recently we found a situation where the owners were participating and the Fund specifically excluded their participation, which then created many problems.  Most Funds have separate participation agreements for owners, so it is important to be aware of this from the start.

Written by Kurt Needles
Needles & Associates
P: 303.430.4225 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it   

At some time in their career, a payroll auditor will be told by an employer that their company is not signed to a collective bargaining agreement (CBA), even though they are reporting employees. Sounds ridiculous, but it happens a lot. Hopefully the auditor has a copy of the signature page in their file.  This is a good sign that the company is not reporting all hours worked in qualifying employment under the CBA.  The best short-term solution, if possible, is to copy all the payroll information and let the Fund/Union figure out the employer’s status. After the status is determined, the report can be written up. If they are deemed not to be bound, then all hours are over-reported and need to be refunded, up to limits in ERISA, and all hours back to the day their the contract ended, sometimes years, are to be removed from welfare eligibility and pension vesting.

Sometimes action by the employer, the filing and signing of the monthly report, will bind them to a CBA. We encountered one situation where the employer was signatory to a project agreement in 1992, and the key men stayed on with the employer and were reported from that point on.  What further complicated the audit was that in 1992, only a welfare and DB pension fund existed.  Since then, a defined contribution pension and mandatory employer contributions to a training fund were added.  So if the employer is deemed to be signatory due to their actions, would the new contributions be required?