By Mike Bedel, CPA, MBA, CGMA
Partner, Director of Audit & Assurance Services
If your company’s 401(k) plan has more than 100 eligible participants, it is large enough that the U.S. Department of Labor requires an audit of your plan. This audit must be attached to your annual 5500 filing, but is often viewed as an unnecessary compliance cost by the 401(k) plan sponsor.
The true purpose, however, for the required audit of this employee benefit plan is to protect various stakeholders in the plan, especially the plan participants.
Many employees rely on their 401(k) plan to save for retirement. Many expert resources such as Forbes describe it as “the single best wealth accumulation vehicle available to the vast majority of Americans.”
However, most employees are not well-versed in how their 401(k) plan operates. As a result, they may not be aware if their personal accounts are not being appropriately credited for their contributions.
By taking the audit process seriously, the plan sponsor communicates that they understand the value their employees place on the wealth they’ve accumulated in their individual 401(k) accounts. When a plan sponsor makes decisions that minimize the role of the audit, they are perceived by their employees as not valuing the hard-earned money set aside over the years – or even as putting their own interests ahead of the employees’.
The Department of Labor and the Internal Revenue Service continue to emphasize the importance of fiduciary responsibility to those involved in the management of the retirement plans. They also stress the importance of a thorough and complete audit process as a significant means of oversight on the plan’s operations.
Additionally, the audit provides some protection to a fiduciary of the plan who is taking their role seriously. It is a way for them to act upon their responsibilities to protect the plan. And it serves to identify if the plan is operating outside of compliance with regulations from the DOL or IRS.
Sponsel CPA Group performs audits of defined contribution employee benefit plans, such as 401(k) plans. We take this responsibility very seriously and value the role we play in protecting the interest of all stakeholders for the plans we audit.
If you have questions about audits of 401(k) plans, please contact Mike Bedel at (317) 613-7852 or email [email protected].