Preparing for an ERISA Audit

Preparing for an ERISA plan audit often starts with understanding what the audit looks for and how daily plan operations support compliance. For plans that cover 100 or more eligible participants at the beginning of the year, the audit is a required part of filing Form 5500. But beyond meeting filing requirements, the process gives sponsors a chance to review how contributions are handled, how participant data is tracked, and how internal controls are working.

Planning ahead can make the audit process more manageable and help sponsors catch small issues before they grow into larger concerns. It also supports compliance and keeps the plan running smoothly over time. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

Understanding ERISA Audit Requirements

Most retirement plans are governed by the Employee Retirement Income Security Act of 1974, known as ERISA. Once a plan covers 100 or more eligible participants at the start of the plan year, an independent audit is generally required. The audit reviews whether the plan’s financial reporting is accurate and whether daily operations match the terms set out in the plan documents and complies with other standards. Completed audit reports are filed with Form 5500 and made part of the plan’s public record.

There is one exception that can apply in some cases. Under the 80-120 rule, plans with between 80 and 120 eligible participants may be able to keep the same filing status as the prior year. For example, a plan that filed as a “small plan” last year could continue doing so if the participant count stays under 121.

The audit process serves a broader purpose than filing requirements alone. It gives sponsors and fiduciaries a clear view of how the plan is functioning, whether internal controls are operating effectively, and where improvements may be needed. Understanding what auditors look for is an important first step toward a smooth audit experience.

How to Prepare for an ERISA Audit

Preparing for an ERISA audit means making sure the plan’s records are complete, accurate, and aligned with how the plan is actually being operated. A few core areas typically draw the most attention from auditors.

• Plan Documentation — Auditors will review the official plan document, any amendments, adoption agreements, trust agreements, investment policy statements, and contracts with service providers. These documents show how the plan is designed to operate and serve as a baseline for comparing actual practices.
• Participant Data — Accurate participant records are critical. This includes verifying eligibility, hire and termination dates, compensation details, and participant status, whether active, terminated, or retired. It is common for audits to find discrepancies between payroll data and plan records, so reviewing participant information ahead of time can prevent issues.
• Financial Transactions — Auditors also review how contributions, distributions, loan repayments, and investment activity are recorded and processed. Employee contributions must be remitted timely according to Department of Labor standards. Delays or inconsistencies can trigger findings and may require corrective action.
• Plan Operations — Beyond records, experienced auditors evaluate how the plan operates day to day. They review whether contributions are deposited promptly, whether loans and distributions are processed according to the plan’s terms, and whether internal controls are functioning properly. Strong daily operations help ensure that plan activities align with both regulatory requirements and plan documentation.

SECURE 2.0 Regulations to Watch 

The SECURE 2.0 Act introduced new requirements for retirement plans. Although some provisions take effect in future years, auditors are already considering how plans are preparing for compliance. Key SECURE 2.0 changes include:

Automatic Enrollment — Most new 401(k) and 403(b) plans established after December 29, 2022, must implement automatic enrollment starting in 2025.

Required Minimum Distributions — The age for RMDs has increased from 72 to 73 for individuals born between 1951 and 1959 and will rise to 75 for those born in 1960 or later.

Long-Term Part-Time Employees — Plans must offer participation to LTPT employees who work at least 500 hours in two consecutive years, starting with plan years beginning in 2025.

Plan sponsors will want to update documents, systems, and participant communications where necessary. Auditors may inquire about the status of these updates.

Practical Steps for Audit Preparation 

Taking steps to prepare can make the audit process more efficient and can help reduce the risk of findings:

• Assign a primary contact — Designate someone who understands the plan’s operations and can coordinate document requests, service provider communications, and auditor questions.
• Review plan documents and participant records — Confirm that all key plan documents are complete and up to date, and that participant data such as eligibility dates, compensation, and status is accurate.
• Reconcile financial activity — Verify that all activities match the plan’s financial statements before the audit begins.
• Communicate with service providers — Work with TPAs, custodians, and recordkeepers to review their records and address any inconsistencies or missing information ahead of time.
• Identify and correct known issues — If operational errors have occurred, consider using voluntary correction programs to address them before the audit review.

Choosing the right plan auditor is another important step. Sponsors will want to look for firms that have specific experience auditing employee benefit plans, understand ERISA requirements, and maintain independence from plan operations. 

Contact Us

The audit process is an opportunity to strengthen internal controls and build trust with plan participants. As ERISA requirements continue to evolve, staying proactive helps retirement plans remain compliant and resilient. If you have questions about the information outlined above or need assistance with your next benefit plan audit, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.