401k Audits

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Your retirement plan audit can be daunting, but it doesn’t have to be. The blend of compliance and financial factors makes these audits complex, but you can stay ahead by knowing what to expect and working with a team of experienced professionals. The following reviews the basic 401(k) audit requirements so you can get started confidently.

Generally required for plans with more than 100 participants with account balances on the first day of the plan year, employee retirement plan audits are needed for “large” plans. They are official inspections to ensure that the plan meets guidelines and regulations set by the Internal Revenue Service (IRS) and the Department of Labor (DOL). Audits must be conducted by an independent accounting firm using Generally Accepted Audit Standards (GAAS). They must also adhere to the DOL and Employee Retirement Income Security Act (ERISA) regulations of 1974.

An employee pension audit serves two primary purposes:

1. To ensure that your plan complies with DOL and IRS regulations, along with the plan-related documents and
2. To determine that the financial information reported on Form 5500 and company financial statements is accurate and complies with Generally Accepted Accounting Principles (GAAP).

Once you and your third-party administrator (TPA) determine that you need an audit, the next step is to hire a qualified CPA firm like BPM to conduct the audit.

Unlike financial statement audits, much of the audit information will be provided to your audit firm directly from your TPA. It is essential to determine whether you are in audit status as soon as possible and provide sufficient time for the audit process before the deadline.

Important dates (for calendar year-end plans)
January 31: The date by which your employee census must be submitted to your TPA.
March 15: The date by which your TPA should tell you if you are in audit status.
July 31: The initial deadline is completing the audit and filing Form 5500.
October 15: Extended deadline to complete the audit and file Form 5500.

At a minimum, your auditor will request the following documents:

• Copies of the plan documents, including the Plan’s adoption agreement, essential plan document, summary plan description, IRS opinion letter, and investment policy.
• Copy of the Plan’s Form 5500.
• Copy of the Plan’s fidelity insurance bond.
• Retirement plan/Investment committee meeting minutes.
• Employee census report.
• Payroll reports.
• For selected participants, evidence of documented participant birth and hire dates (such as Form I9s).
• Schedule of remittances made to the retirement plan trust.
• Document internal controls and procedures, including procedures for payroll, eligibility, contributions, distribution, and loans.
• Audit package from your third-party administrator.

If you’re a first-year client, we’ll begin with a kick-off meeting to walk you through all the steps so you know what to expect. We will let you know what needs to be provided by the company, the TPA, and the investment advisor (if there is one), and we’ll provide you with our proprietary pre-planning checklist so you can get started quickly and easily.

We also provide our clients with information about fiduciary requirements and best practices, assisting with appropriate referrals when needed. We communicate directly with your TPA whenever possible so you can focus on your core business. To establish continuity, we try reassigning our staff to the same clients each year.

Furthermore, we pride ourselves on being able to provide sound advice to our clients. BPM’s employee benefit plan audit team consists of dedicated professionals with extensive knowledge of ERISA, DOL, and IRS guidelines, along with years of experience. We are proud to have been one of the first firms to join the AICPA’s Employee Benefit Plan Audit Quality Center, a public policy organization dedicated to fostering high-quality performance by public company auditors. Performance by public company auditors.

If you are facing a 401(k) audit, contact us, for a consultation on getting started.

What does a 401(k) audit cost