What is a 401(k) Audit and why is it needed?
Briggs & Veselka provides audits for plans subject to the Employee Retirement Income Security Act (ERISA) regulations under the U.S. Department of Labor (DOL) regulations, as well as SEC 11-K filings.
Once the number of 401(k) plan participants surpasses 100, the IRS requires:
-An annual Form 5500 to be submitted
-An audit of the plan to be performed and attached to the annual Form 5500
If these items are not performed, the IRS can assign fees on a per daily basis for lack of Form 5500 alone.
401(k) Audit Services We Perform
Limited Scope Audit
-A limited scope audit can be performed if an asset certification is presented from a qualified institution, such as a Trust Company, Bank or Insurance Company, certifying the investments and activity for the plan year. The limited scope audit still covers the entire plan year and its operations and is acceptable with the Annual Form 5500 filing; however, requires less audit procedures related to the investment year-end balances and investment income for the period under audit.
Full Scope Audit
-A full scope audit includes the same procedures as that of a limited scope audit but also includes procedures that test the year-end investment balances as well as the investment activity for the period under audit. Full Scope audits are necessary in which there is no certification received from a qualified institution to certify the investment balances and activity for the period under audit.
How You Can Prepare
Gathering any of the below documents will better prepare you and ensure a successful audit process.
Helpful Documents for a 401(k) Audit
401(k) plan and legal compliance governance documents such as:
-Summary plan description
-Amendments to these plans or the ‘restated’ document
-IRS determination letter
-Fidelity bonds – any bonds covering the plan for fraud from fiduciaries
-Trustee/Custodian Audit package – Annual
-Certified trust statements
What are the Risks for Plan Sponsors?
As a plan administrator, you are responsible for properly selecting and monitoring service providers, including but not limited to qualified auditors and record keepers of employee benefit plans.
Failing to act prudently, the Plan Administrator could face potential fiduciary violations and civil penalty assessments. It is in the Plan Administrator’s utmost interest to ensure the accurate administration and regulatory audits of your plan.
- We can provide you step-by-step guidance on administration and audit regulations so that you are prepared every step of the way.
- To gain a better understanding of your responsibilities, view our Fiduciary Responsibilities checklist here.