Employee Benefit Plans – Frequently Asked Questions
Employee Benefit Plan Audit Frequently Asked Questions
Generally, an audit is required for plans with 100 or more participants at the beginning of the plan year. However, exceptions such as the 80-120 participant rule, plan type, and ERISA status may affect the requirement, making it important to evaluate each plan’s specific circumstances.
Common plans that may be subject to audit include 401(k) plans, 403(b) plans, defined benefit pension plans, Employee Stock Ownership Plans (ESOPs), and health and welfare benefit plans. Audit requirements depend on plan size, type, and applicable regulations.
A properly executed audit enhances fiduciary oversight, verifies that the plan is operating according to its terms, and ensures that financial statements are accurate. It also helps identify potential errors, strengthens internal controls, and supports compliance with Department of Labor and IRS expectations.
ERISA Section 103(a)(3)(C) allows plan administrators to elect to instruct the auditor not to perform any auditing procedures with respect to the investment information prepared and certified by a bank or similar institution or by an insurance company that is regulated, supervised, and subject to periodic examination by a state or federal agency, and further that acts as trustee or custodian.
Effective audit preparation includes maintaining accurate participant records, ensuring proper documentation of plan transactions, and verifying compensation and deferral calculations. Experienced audit teams can assist with readiness reviews, self-corrections, and data analysis to streamline the process.
