Preparing for Your Next 401(k)/403(b) Audit

Managing a company’s 401(k) or other retirement plan audit can be a challenging task. Ask anyone who is responsible for working with the audit firm and they will tell you it can be time-consuming to meet the multiple and ongoing requests made throughout the process. Retirement plan auditors are required to review several aspects of a plan’s operations, policies and financial information, so it’s no surprise they need access to a lot of information. Beyond this, additional items may be needed during the audit to validate the initial documentation provided.

While this situation can be daunting, the good news is that through adequate preparation the audit process can be much easier. Proactive planning with your auditor will allow you to get the needed information before the start of the audit, which will minimize additional requests, disruptions and delays. Time spent planning now will save you time later. To help clients, prospects and others prepare for their next audit, Wilson Lewis has provided some tips below.

Retirement Plan Audit Information

Below is a general list of the type of information that may be requested during your plan audit. Please be aware that your auditor may ask for additional documentation and information in addition to what is listed below.

• General Plan Information – This includes key details about the plan’s operation, including copies of the latest plan documents and trust agreements, summary plan description, sample enrollment packages sent to employees, minutes from board/committee meetings, proof of plan bonding and parties of interest including the plan recordkeeper, payroll provider, plan investment/custodian, trustee and sponsor. You may also be asked to provide information on the number of eligible participants at the start and end of the year, copies of agreements with service providers and contact information for all individuals, including third parties, involved in plan management and operations.
• Plan Internal Controls – This may include copies of job descriptions, accounting manuals and internal controls documentation of payroll and human resource systems. You may also be asked to include a copy of the SOC 1 report for relevant third-party administrators (TPA) and service providers along with plan responses to identified controls.
• Financial Reporting – The information requested in this category often includes year end reporting packages from your TPA, draft copies of the financial statements, notes to the financial statement, supplemental schedules and draft copies of the Form 5500.
• Cash and Investments – Requests may include a copy of the financial policy statements, statement of plan assets at plan year end, bank statements, copies of contracts/policies for insurance contracts, list of pending trades, list of outstanding loans (and if loans are permitted) and range of interest rates on outstanding loans.
• Participant Information – This is information the auditor will need to perform participant level testing. This often includes salary information, Form I-9, plan enrollment or opt out form, timecards, payroll registers, loan request forms, distribution request form, loan request form and rollover contribution request form (when applicable).

Communication is Essential

Proactive and open communication with your auditor prior to the start of fieldwork will help you gain a clear understanding of what documentation will be needed. We recommend that companies identify a single individual to manage the distribution and fulfillment of requests as it makes the process run more smoothly. Finally, it’s okay to request periodic updates on the audit, especially if you have questions or concerns.

Contact Us

Proactive planning will ensure your next benefit plan audit process goes smoothly and without unwelcome surprises. The time spent planning and preparing will pay off in the end. If you have questions about the information provided above or need assistance with your next plan audit, Wilson Lewis can help! For additional information please call us at 770-476-1104, or click here to contact us. We look forward to speaking with you soon.