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      Lincoln Financial Workpaper Guide

      Contents

      Overview

      Input - Output Matrix

      Contribution Allocation Testing

      Contribution Timeliness

      Distribution Package

      Investment Disclosure Support

      Investment Income Allocation

      Loan Package

      Participant Activity Detail Package

      Plan Analytics

      Rollovers Package

      Trial Balance

      Sampling Considerations

       

      DISCLAIMER: The AuditMiner tool and workpaper guide has not been peer reviewed. The workpapers, including procedure steps, may not be appropriate for every scenario. The auditor is required to use judgment based on experience and knowledge of plan to determine if, when, and how to use the workpaper guide and procedures within. The conclusions on all testing workpapers will need to be updated for any exceptions or discrepancies identified by the auditor.

      Overview

      This Workpaper Guide was created to be used as a reference for AuditMiner customers. The guide explains the purpose of each workpaper, where the auditor can find the audit procedures in the AICPA Employee Benefit Plan Audit & Accounting Guide (AAG-EBP) and addresses frequently asked questions.

      The data for the following audit workpapers is obtained from the recordkeeper. The recordkeeper maintains the activity posted to the participants’ accounts and allocates plan activity. You can find the list of recordkeepers that AuditMiner has integrations with here.

      If you have any questions or feedback, please email support@auditminer.com.

      Input - Output Matrix

      The below matrix shows the AuditMiner workpapers generated from each Lincoln Financial input report. You can find instructions for how to obtain the input reports in the AuditMiner platform.

      Lincoln Financial

      Contribution Allocation Testing

      The purpose of contribution allocation testing is to determine that contributions have been allocated to individual participant accounts in accordance with the participant elections. A sample of contributing participants are selected, and the contribution is recalculated based on the contribution and percent elected for each investment fund.

      The contribution amounts and allocations are as of the plan year end due to reporting restrictions by the recordkeeper. AuditMiner recommends the auditor replace the year end allocation with a pay period during the year if the SOC 1 report does not address contribution allocations. If the contribution allocation changed during the year, there will be a variance for which the auditor will want to investigate further, if deemed necessary.

      A selection of participants is made from the total population of participant contributions or participants receiving contributions during the year. The workpaper will include the following information regarding the sample:

      1. Population Source: Contributions from the Participant Activity Detail Package (All Money Sources)
      2. Population Amount: Total Contributions
      3. Population Count: Participants with contributions (all money sources)
      4. Sampling Unit: Participant
      5. Seed Number: This number can be used to regenerate the sample selection
      6. Sample Methodology: Sample methodology chosen by auditor. See Sampling Considerations section.

      AuditMiner testing procedures are as follows:

      1. Verified contribution amount agrees to the recordkeeper history.
      2. Verified percent elected agrees to the investment allocation identified on the recordkeeper website (percent elections are addressed by SOC 1).
      3. Verified percent elected agrees to a participant confirmation or participant signed election form (percent elections are not addressed by SOC 1).

      Key Items to Note:

      • The input report does not include the percent elected for allocation, so this information is blank in the AuditMiner workpaper for Lincoln Financial.

      Feedback on the Contribution Allocation Testing workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/mCDMraT2Zq

      Contribution Timeliness

      The purpose of contribution timeliness is to test the number of business days for remittances of participant elective deferrals and loan repayments. AuditMiner provides a schedule of remittances obtained from the recordkeeper and calculates the days to remit based on the payroll date and date received by the plan. AuditMiner has excluded the observed bank holidays from the calculation of the days to remit. (AAG-EBP 5.241)

      At the bottom of the Schedule tab is the average and mode for the days to remit during the plan year to easily identify late deferrals. The mode is the value that is repeatedly occurring in each set.

      The Payroll Date included on the Schedule tab is populated from the recordkeeper input report.  Therefore, AuditMiner recommends that these dates be validated against a payroll calendar, check stub used in other audit procedures, or similar information.  A Tickmark Legend has been included on the Notes tab to indicate the validation procedure performed by the auditor.

      If a delinquent contribution is identified, Schedule H Line 4a – Schedule of Delinquent Participant Contributions is included in the workpaper for documentation.  (AAG-EBP 2.149) This schedule will need to be populated by the auditor, after completion of auditor procedures.

      Feedback on the Contribution Timeliness workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/dx1avP3mXM

      Distribution Package

      The purpose of the Distribution Package is to determine that payments were made in accordance with plan provisions, made to, or on behalf of eligible participants, and transactions are recorded in the proper account, amount, and period. (AAG-EBP 5.187)

      The Population tab is a schedule of all benefit distributions or withdrawals for the current plan year. This tab includes a count of the number of payments which is the population for the sample of payments to be tested. 

      The workpaper will include the following information regarding the sample:

      1. Population Source: Distribution Payments from Population Tab
      2. Population Amount: Total Gross Distribution Amount
      3. Population Count: Number of Payments
      4. Sampling Unit: Individual Payment >$0.00
      5. Seed Number: This number can be used to regenerate the sample selection
      6. Sample Methodology: Sample methodology chosen by auditor. See Sampling Considerations section.

      AuditMiner testing procedures are as follows (AAG-EBP 5.189):

      1. Obtained the distribution request form, verified authorization, and agreed the name, date, type, and gross amount.
      2. Agreed the date of termination to an employee signed document or to support in the personnel file.
      3. Reviewed the plan document regarding eligibility requirements and types of distributions available. Verified that the participant or beneficiary was eligible to receive the distribution.
      4. Recomputed distribution amount based on plan provisions and related documents, benefit election, age, vesting, fees, outstanding loans, and withholdings.
      5. Recomputed forfeited balances based on the vesting provisions of the plan and service history.
      6. Verified the distribution amount agrees with the amount deducted from the participant's recordkeeping statement.
      7. Agreed payment amount, check date, and payee to cancelled check without exception. For ACH's, obtained the ACH request form and agreed routing number and/or account number to payment confirmation.
      8. Verified taxes withheld appear properly calculated and in accordance with participant's request. Per federal requirements, noted a 20% federal tax is withheld on all cash distributions, other than hardship withdrawal and withdrawals that are rolled over directly into a qualified retirement plan.
      9. If a hardship withdrawal, reviewed proof of hardship and verified the reason against the plan document. If the plan elected for the safe harbor option, noted participant election on hardship withdrawal form.           

        The Testing tab breaks out the distribution, vesting percent, and fees by money source to recalculate the net distribution.          

        Years of Service calculates the participants length of service based on the termination date or plan year end if the participant has not been terminated.              

        Key Items to Note:

        • The distribution input report does not include forfeitures, distribution fees, loan defaults, payee, amount paid, or vested percentage by money source.

        Feedback on the Distribution Package workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/mmxWxmmL1E

        Investment Disclosure Support

        The Investment Disclosure Support workpaper can be used to support the amounts reported on the Form 5500, Annual Return Report of Employee Benefit Plan Schedule H, line 4i – Schedule of Assets (Held At End of Year). The workpaper includes the percent each investment makes up of the total plan investments so it can be used for the auditor’s concentration analysis. The workpaper includes the shares, price, and cost for each investment as well as a summary by investment type.

        Key Items to Note:

        • The input report doesn’t include investment ID, ticker symbol, current year shares, current year price, or current year cost.

        Feedback on the Investment Disclosure Support workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/b8H1mfRUt6

        Investment Income Allocation

        The Investment Income Allocation workpaper is used to determine if investment income was properly allocated to participants. (AAG-EBP 5.132) 

        The workpaper performs an analytical review of the difference between 1) the participant return and the plan return, and 2) the participant return and the fund return, to verify a reasonable allocation of the investment income. The fund return is obtained from Yahoo! Finance by calculating the rate of return with the historical opening price balance at the beginning of the plan year and the historical closing price balance at the end of the plan year. While the AuditMiner workpaper includes both the plan return and the published fund return, auditors typically choose to compare the participant return to just one, not both. The period tested for all investments is annual.

        The workpaper will include the following information regarding the sample:

        1. Population Source: Participant Activity Detail Package
        2. Population Amount: Ending Balance from the Participant Activity Detail Package
        3. Population Count: Number of Participants reported on the Participant Activity Detail Package - Summary
        4. Sampling Unit: Individual Participant
        5. Seed Number: This number can be used to regenerate the sample selection
        6. Sample Methodology: Sample methodology chosen by auditor. See Sampling Considerations

        Key Items to Note:

        • The input reports don’t include the ticker symbol and therefore AuditMiner is unable to populate the Fund Return.

        Feedback on the Investment Income Allocation workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/NAWF0wE3iY

        Loan Package

        The purpose of the Loan Package is to determine that loans were made in accordance with the plan’s loan policy. The Loan Package workpaper includes a roll forward of participant loans during the year and all related loan activity on the population tab. AuditMiner recommends the auditor reconcile this roll forward to the activity reported in the trust statement. (AAG-EBP 5.48-.50)

        A selection of loans is made from the total number of loans issued during the current period. AuditMiner has included information on the population tab that could be used to verify loans issued in prior periods are current and interest is being appropriately calculated and remitted if testing is deemed necessary by the auditor. The workpaper will include the following information regarding the sample:

        1. Population Source: New Loans from Population Tab
        2. Population Amount: Total Loans Issued
        3. Population Count: Number of New Loans
        4. Sampling Unit: Individual New Loan
        5. Seed Number: This number can be used to regenerate the sample selection
        6. Sample Methodology: Sample methodology chosen by auditor. See Sampling Considerations section.

        AuditMiner testing procedures are as follows: (AAG-EBP 5.157)

        1. Verified the loan rate and amount were appropriate based on the requirements in the loan policy as of the date the loan was issued.
        2. Verified the number of loans outstanding did not exceed the requirements in the loan policy.
        3. Verified the loan was in good-standing at plan year end and there was no evidence of default.
        4. Verified payment frequency is in compliance with the loan policy.

        After testing procedures are performed, the auditor should update the conclusion as to whether loans were made in accordance with the plan’s loan policy.

        The Notes tab will include the minimum and maximum maturity dates and interest rates on outstanding loans to assist the auditor with financial reporting.

        Key Items to Note:

        • The Loan Package does not include original loan date, original loan amount, payment amount, interest rate, maturity date, unpaid accrued interest, and payment frequency.

        Feedback on the Loan Package workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/CNnDLyZ6G4

        Participant Activity Detail Package

        The Participant Activity Detail Package is a roll forward of all participant activity for the year. The workpaper includes the investment activity per participant on the ‘By Investment’ tab and the money source activity per participant on the ‘By Money Source’ tab. Included at the bottom of each tab is a summary of the respective activity.

        On the Summary tab is a count of the number of participants in the plan and the number of participants contributing. The count of the number of participants in the plan is the population source for the Income Allocation Sample Selection. The count of the number of participants contributing is the population source for the Contribution Allocation Sample Selection.

        The headers for the Participant Activity Detail Package will vary by plan depending on the activity in the plan and the transactions that occurred during the year.

        Feedback on the Participant Activity Detail Package workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/rBnpMCFYP2

        Plan Analytics

        The Plan Analytics workpaper is often utilized as preliminary analytical procedures performed during the risk assessment process. (AAG-EBP 3.18-.19)

        Review of analytics may assist with the following:

        1. Assessing the risks of material misstatement to provide a basis for designing and implementing audit procedures.
        2. Enhancing the understanding of the business and any significant transactions that occurred during the year.
        3. Identifying unusual transactions, events, amounts, ratios, and trends that may impact the audit.

        AuditMiner generates analytics over the key areas of the employee benefit plan audit which includes investments, contributions, disbursements, and expenses. Currently, AuditMiner does not populate prior year information other than beginning of the year investment amounts. The provided analytics are listed below:

        1. Assets per participant
        2. Investment return compared to published benchmarks
        3. Deferrals per participant
        4. Employer contribution per participant
        5. Employer contribution rate
        6. Average distribution payment
        7. Expenses per participant
        8. Expenses as a percentage of average plan assets

        The auditor should modify the expectations in the workpaper and then conclude as to whether the analytic met documented expectations.

        Analytic numbers are generated from the Participant Activity Detail Package and Distribution Package. The published benchmark is the S&P 500 return obtained from Yahoo! Finance which can be found at    https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

        Feedback on the Plan Analytics workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/j8JrcqUyYx

        Rollovers Package

        The purpose of the Rollovers Package is to determine that rollovers were authorized and credited to the proper participant account. A sample of rollovers can be made to verify that the rollover is allowed by the plan’s provisions and properly classified, test that the participant’s investment elections have been complied with, if applicable, and the rollover amount and source is properly reflected in the participant’s account. (AAG-EBP 5.250)

        The workpaper will include the following information regarding the sample:

        1. Population Source: Rollover Population
        2. Population Amount: Total Rollovers
        3. Population Count: Number of Rollovers
        4. Sampling Unit: Individual Rollover
        5. Seed Number: This number can be used to regenerate the sample selection
        6. Sample Methodology: Sample methodology chosen by auditor. See Sampling Considerations section.

        AuditMiner testing procedures are as follows: (AAG-EBP 5.250)

        1. Obtained a copy of the rollover check to verify the amount was accurate and the date processed was reasonable.
        2. Verified rollover request form was signed by participant.
        3. Verified the rollover check was received from a qualifying retirement plan.
        4. Verified the rollover funds were allocated to investments in accordance with participant direction.

        Key Items to Note:

        • The Rollover Package does not include rollover date, participant elected allocation percent, and qualified institution as it is not included in the input reports.

        Feedback on the Rollovers Package workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/0F7se3k1J9

        Trial Balance

        The trial balance is a listing of all balances in the employee benefit plan. AuditMiner has prepared a trial balance worksheet from the information available from the input files. If information is missing, it is identified at the bottom of the trial balance as well as where the information can be found on the recordkeeper’s website or reports. If there are transactions such as a merger, change in recordkeeper, or another unique event, they will need to be populated by the auditor.

        There is a column for accruals and other adjustments for those auditors using this workpaper as the trial balance within their audit file.  For those auditors who use the audit software trial balance module, this column may not be needed.

        Feedback on the Trial Balance workpaper? We would love to hear your thoughts!  Please consider leaving your feedback here: https://forms.office.com/r/WNqr8YizXX

        Sampling Considerations

        AuditMiner workpapers document the population source, population amount, population count, sampling unit, seed number, and sample methodology for each sample selected. When selecting the sampling methodology and size, AuditMiner provides a free text box for the auditor to provide documentation for each sample. This will appear on the notes tab of the workpaper. If the auditor does not use the textbox it will not appear on the workpaper.

        The following workpapers provide the option to generate a random sample.

        1. Contribution Allocation Testing
        2. Distribution Package
        3. Investment Income Allocation
        4. Loan Package
        5. Rollovers Package

        Random sampling gives each item in the sampled population an equal chance of being selected. It helps to reduce the bias involved in the sample and does not require technical knowledge of the population. The sample quantity is provided by the auditor based on their judgement.  The auditor can select a percentage of the population or a specific number of selections.

        Stratified sampling can be used for the Distribution Package when items from each Distribution Type need to be represented. AuditMiner divides the population into subgroups based on Distribution Type, then selects random samples from within each subgroup.  The sampling fraction for each Distribution Type is taken in the same proportion that the Distribution Type has in the population. The auditor will have the option to select if they would like a guaranteed sample from each category. If this is selected and there are more categories than sample selections, the sample size will be more than what they indicated in testing setup.

        AuditMiner provides a random seed number for each sample selection made. This can be used along with the same population data file, same desired sample size, and the same sampling method to replicate a prior sample generated.

        If you have any questions, please reach out to a member of the AuditMiner team at support@auditminer.com.

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