Understanding 401(k) Audit Requirements


Navigating the complexities of a 401(k) audit can seem overwhelming, but with the right knowledge and professional support, you can manage the process smoothly. Here’s a straightforward guide to help you understand the essentials of 401(k) audit requirements.

 What is a 401(k) Audit?

A 401(k) audit is generally required for retirement plans with more than 100 participants with account balances on the first day of the plan year. These audits are official reviews to ensure the plan complies with guidelines and regulations set by the Internal Revenue Service (IRS) and the Department of Labor (DOL). Conducted by an independent accounting firm, these audits must follow Generally Accepted Audit Standards (GAAS) and adhere to the regulations of the DOL and the Employee Retirement Income Security Act (ERISA) of 1974.


The primary purposes of a 401(k) audit are:

  1. To ensure the plan complies with DOL and IRS regulations, as well as with your plan-related documents.
  2. To verify that the financial information reported on Form 5500 and company financial statements is accurate and in compliance with Generally Accepted Accounting Principles (GAAP).


What Does a 401(k) Audit Involve?

Once you and your third-party administrator (TPA) determine that an audit is needed, the next step is to hire a qualified CPA firm to conduct it. The audit process involves several steps, and much of the necessary information will be provided to your audit firm directly from your TPA. It’s crucial to determine whether you need an audit as soon as possible and allow sufficient time for the process before the deadline.


Key Dates for Calendar Year-End Plans:

– January 31: Submit your employee census to your TPA.

– March 15: Your TPA should notify you if an audit is required.

– July 31: Initial deadline to complete the audit and file Form 5500.

– October 15: Extended deadline to complete the audit and file Form 5500.


 401(k) Audit Requirements

Your auditor will typically request the following documents:

– Plan documents, including the Plan’s adoption agreement, basic plan document, summary plan description, IRS opinion letter, and investment policy.

– Copy of the Plan’s Form 5500.

– Copy of the Plan’s insurance bond.

– Retirement plan/Investment committee meeting minutes.

– Employee census report.

– Payroll reports.

– Evidence of documented participant birth and hire dates (such as Form I-9s) for selected participants.

– Schedule of remittances made to the retirement plan trust.

– Documentation of internal controls and procedures, including those for payroll, eligibility, contributions, distributions, and loans.

– Audit package from your TPA.


 Working with KB CPA for Your 401(k) Audit

As a first-year client with KB CPA Services, P.A. , we begin with a kick-off meeting to outline the audit steps and set expectations. We’ll explain what needs to be provided by the company, the TPA, and the investment advisor, if applicable. We also provide a proprietary pre-planning checklist to help you get started quickly.

We offer information on fiduciary requirements and best practices, and assist with referrals when needed. We aim to communicate directly with your TPA whenever possible so you can focus on your core business. To ensure continuity, we strive to assign the same staff to your audits each year.

KB CPA’s employee benefit plan audit team comprises professionals with extensive knowledge of ERISA, DOL, and IRS guidelines, backed by years of experience of Employee Benefit Plan Audit

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