By Craig Erickson
As the number of participants in your company’s 401(k) plan grows, at some point the plan will require an audit. Also known as an employee benefit plan (EBP) audit, the U.S. Department of Labor generally requires one when the number of participants in your employee benefit plan reaches 100, though there are some exceptions.
This audit, a result of the Employee Retirement Income Security Act of 1974, assesses whether an employer’s plan has the liquidity to meet current and future financial responsibilities. When your business needs to file an annual 401(k) plan audit, you’re going to need a CPA firm with the specialized skill set to perform the service at the highest level.
Know your fiduciary responsibility
The Department of Labor takes this annual audit and filing very seriously. Companies that file late or file inaccurate or incomplete audits could face fines of more than $1,000 per day.
Demand relevant experience
It can be tempting to take the easy route and use your current CPA firm for the 401(k) plan audit, regardless of its lack of professional experience in this very narrow area of auditing. But a 401(k) plan audit requires discrete proficiencies, and it’s important to hire a firm with the background, training and ongoing professional development to conduct these audits.
Evaluating your auditor’s qualifications
An extremely critical step in selecting your plan’s auditor is to evaluate and review the qualifications of the prospective auditor. You should consider the auditor’s experience and practice development, including examining the specific benefit plan types and sizes, to make sure the auditor is suitable to the type and size of your plan. You should also look at the auditor’s practices in regards to continuing professional education.
With the right partner, your 401(k) plan audit will yield a filing that adds real value to your organization while meeting all regulatory requirements of the DOL.
As partner-in-charge of the Employee Benefit Plan Group at Wiss LLP, Craig Erickson is an EBPAQC member who handles audits of defined contribution and defined benefit plans for clients. Reach him at firstname.lastname@example.org.
For more details on how to find the right auditor for your 401(k) plan, read the entire article here.