Plan Sponsor Series #7: Basic Thoughts about 401(k) Audits

Originally published by Lance Reising on December 5, 2018

In case you are tasked with administering your company's 401(k) plan, along with all of your other duties, we were wondering if a few thoughts about 401(k) audits might be helpful. Whether your plan is currently required to do an audit or not, it may be in the future. So let's look at some of the basics.

Here we highlight a few of the points made in "The Complete Guide to a Fast, Pain-Free 401(k) Audit" from the ForUsAll 401k Blog.

• Who needs to have an audit? Plans with 100 or more eligible employees are required to have an audit completed. There is an 80 - 120 Rule, however, which allows a plan not to get an audit if a small plan return was filed last year and the employee count this year is between 80 and 120 employees.
  
• What is the deadline for filing an audit? Seven months following the plan's year-end. In many cases, extensions of an additional 2.5 months can be granted.
  
• The first step in the audit process is the plan document and design review. The auditor will gain an overview of the plan and the administrator will gather the necessary documentation

• The second step is the review of the 401(k) deposits and a sampling of various participant-level transactions and processes.
  
• The final step is the completion of the audit, provision of the Form 5500, fixing any mistakes and addressing any issues which were discovered.
  
• To have a smoother audit, be sure to keep the required documentation in good order and archived in a central place for easy access.
  
• Questions to help you find a good 401(k) auditor: a) does the auditor's location suit your needs? b) How many plans does the audit firm handle? c) How important are 401(k) audits to the accounting firm overall? d) Is the cost of the audit reasonable for the quality of the audit you expect?

Have questions about your plan and it's audit? Reach out here for more info.