Planning for an Efficient 401k/403b Plan Audit
If your organization sponsors a 401k or 403b plan with more than 100 participants, the plan likely needs an audit to ensure the plan’s financial statements are accurately presented and that the plan operated in accordance with its plan document and Department of Labor (DOL) regulations. When an audit is required, the DOL requires that the audited plan financial statements be submitted with the plan’s annual Form 5500 filing.
Here are some tips to consider in planning for an efficient employee benefit plan audit:
Engage the Right Auditor
As the plan sponsor, you are responsible for evaluating all the plan’s service providers, including the independent auditor. If your plan is newly subject to the audit requirement, or if it’s been a while since you evaluated your auditor, consider sending requests for proposals to several potential service providers. In addition to cost, evaluate potential auditors based on their experience with plans like yours, competence in the overall ERISA space, their commitment to integrity and data security, and other qualities.
Some large firms handle several hundred employee benefit plans, or use them as “filler-work” to be completed during the summer so that they don’t have to layoff their staff outside of the typical audit and tax season. Some small firms take on these types of engagements despite not having adequate experience to perform them because they don’t want to see a growing client leave them for a more qualified CPA firm. Look for a CPA firm that you feel confident has the expertise needed to audit your plan, will treat you and your audit with the respect and care deserved, and of course that will charge a reasonable fee for the work to be completed.
Be Proactive During Audit Planning and Fieldwork
Once you’ve engaged your plan auditor, make sure you fulfill requests for information and support timely. The auditor should send an initial general information request. Once this information is provided and reviewed, they will follow up with a request for specific supporting documents, like payroll and contribution records for sampled individuals.
Many trustees or custodians will allow plan sponsors to grant their auditors read-only access to the plan’s website so that many of these information and support requests can be completed directly between the auditor and custodian, saving you time.
Make sure to inform your auditors as early as possible about any new plan features or amendments. Have significant documents like the plan document and agreements with custodians, trustees, or third-party administrators organized and ready to be provided to the auditor.
Need help determining whether your plan requires an audit? (There are special rules when your plan is approaching, or recently surpassed 100 participants.) Do you know your plan needs an audit and you’re looking for a qualified CPA firm to perform it? Schreiber Accounting and Advisory can help you with 401(k) plan audit and 403(b) plan audit services. Contact the firm for more information.
Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.