Employee Benefit Plan Audits | 401(k) Plan Audits

Employee benefit plan audit requirements have changed, specifically the definition of plan participants. Your 401(k) plan or other employee benefit plan could be impacted and require an audit, according to federal law. However, you may also discover that you don’t need an audit anymore. With more than two decades of experience in audit services and advisory for plan sponsors and plan administrators, we can provide clarity.

Through our audits and internal control correspondence, CarlsonSV addresses the risk factors and compliance necessary to meet your responsibilities to employee benefit plan participants. Through an audit, you gain valuable insights to pursue recommended changes.

A defined contribution plan such as a 401(k) or 403(b) plan, or a defined benefit plan, supports your recruitment and retention. Make sure you are fulfilling your fiduciary responsibilities. We offer:

Defined contribution plan and defined benefit plan audits
Employee benefit plan audit requirements advisory
Participant eligibility advisory (long-term seasonal, part-time eligibility)
Secure Act 2.0 advisory

Do you have questions as a plan sponsor or plan administrator? We are happy to help and point you to the right resources. Contact us for guidance or to schedule your employee benefit plan audit.

FAQs

What is an employee benefit plan audit?

An employee benefit plan audit is an independent examination of a retirement or benefit plan’s financial statements and related records. The audit is performed by a qualified CPA firm to determine whether the plan’s financial information is presented fairly and whether the plan is operating in accordance with applicable laws and plan provisions.

Why does our plan need to be audited?

Federal law under ERISA requires certain employee benefit plans to undergo an annual audit once they reach a specified size. The audit is designed to protect plan participants by promoting transparency, accountability, and proper fiduciary oversight of plan assets and operations.

Who requires the audit?

The audit requirement comes from the U.S. Department of Labor (DOL) under the Employee Retirement Income Security Act (ERISA). While the audit itself is not submitted directly to the DOL, it must be included with the plan’s annual Form 5500 filing.

What is Form 5500?

Form 5500 is an annual federal reporting form used to disclose information about an employee benefit plan’s operations, financial condition, and compliance with applicable regulations. It is filed with the U.S. Department of Labor and, in certain cases, the IRS.

How does Form 5500 relate to the audit?

When a plan is subject to an audit, the auditor’s report must be attached to the Form 5500 filing. The Form 5500 generally cannot be filed as complete without the audit report when an audit is required.

Why is Form 5500 required?

Form 5500 promotes transparency and accountability by providing regulators and plan participants with information about how the plan is managed, funded, and governed. Most retirement plans are required to file Form 5500 each year, even if no audit is required.

What types of plans are subject to an audit?

Common plans subject to audit include:

401(k) and other defined contribution retirement plans
Defined benefit (pension) plans

Health and welfare plans may also require audits in certain circumstances, depending on funding arrangements and size. Not all plans are subject to mandatory employee benefit plan audit requirements.

When does a plan become subject to audit?

Generally, a plan is required to have an audit when it has 100 or more participants at the beginning of the plan year, applying the IRS and DOL “80–120 participant rule.” This count is based on eligible participants, not just those with account balances.

What are key deadlines for EBP audit compliance?

For plans that operate on a standard calendar year, ending December 31, the deadline for completing an employee benefit plan audit, attached to Form 5500, is July 31 of the following calendar year.

For Non-Calendar Year plans, EBP audits are due on the 31st day of the seventh month following the fiscal year-end.

If an extension is necessary, you can file IRS Form 5558 to request a 2.5 month extension from the original audit filing due date.

For more details, refer to the IRS.gov site: https://www.irs.gov/retirement-plans/form-5500-corner

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CarlsonSV is a member of the AICPA Employee Benefit Plan Audit Quality Center.