Annual Plan Audit Support



Is it time to plan for your annual plan audit? If this is the first year for an audit, you may be feeling a bit overwhelmed. As a rule, plans with 100 or more participants at the beginning of the plan year are required to have a financial audit filed on Form 5500.

A full-scope audit is required when the trustee or custodian does not or cannot certify both the accuracy and completeness of the information submitted as it relates to the investment information. We find that most plan audits tend to be limited-scope audits.

Here are some guidelines that may help as you gather your information for your audit.

  • You need to provide your auditor with all current versions of your plan documents. This will include a summary of the plans description, any amendments, as well as previous audit reports and filed 5500 forms and determination letters.
  • Are your plan assets held by a trust company? You may be able to reduce the cost of your audit if you are eligible to have the limited-scope exemption. The trust company must provide a certification for the completeness and accuracy of any investments or related transactions held for your plan.
  • You will need to provide your auditor with an annual census report for the year that your plan is being audited, include all eligible and in-eligible plan participants. This is an area that has the tendency to have the most errors so you will need to reconcile the census data and your annual payroll data so that you can avoid errors.
  • Have your record-keeper perform a discrimination test, a participant allocation report, and return any excess contributions within 2 ½ months after the plans year end or a 10% penalty will apply.
  • Does your plan permit participant loans? If so, you will need to reconcile all loans at the plans year end to provide your auditor with a loan summary.
  • Participant loan payments and contributions are required to be deposited on the earliest date that contributions to the plan can be segregated from employer general assets. All employer contributions are usually required to be deposited, including extensions, by the due date of the 401(k) plan sponsor’s income tax return.

Your plan auditor will have a better understanding of how your plan’s accounting, internal controls as well as your risk of fraud once all the information is provided. Once the field work and financial statements are completed, your auditor will provide you with a report of any control deficiencies that were found during the audit. You will also receive a report with any adjustments made to the Planning-for-Retirement accounting records. You will then sign and return this report to your auditor. Once the draft of the financial statement is approved, you will be provided a final financial statement to be filed on Form 5500.

For more information on selecting an Auditor for your plan:

Selecting an Auditor