By Eric Woodruff, CPA, CCIFP
Partner, Director of Audit & Assurance Services
Email Eric
Does your company’s 401(k) or retirement plan now have 100 or more participants? The Department of Labor (DOL) says it’s time for an audit!
Sponsel CPA Group can help, and this season is an ideal time to tap into our expertise. First, summer months tend to be a better time for CPA firms to take on retirement plan audits, as the hustle and bustle of tax filing season is behind us. Second, for 401(k) plans with calendar year ends, Form 5500 and the auditor’s report are usually due on July 31, unless an extension is filed.
Sponsel CPA Group is a member of the American Institute of CPAs (AICPA) Employee Benefit Plan Audit Quality Center and is qualified to perform audits of most 401(k) plans. We are also available to help management teams prepare for an outside audit of their plan. And we have a team that can provide third-party administration services for your benefit plan throughout the year, should you wish to outsource this function entirely.
Other benefits of working with our team include:
- Experienced auditors with specific knowledge of your industry/profession
- Stable audit team that delivers a consistently smooth audit process for your company
- Improved business decisions based on reliable data
- Gaining competitive analysis through key performance indicators (KPI)
- Ensuring reliability and credibility of financial reporting and analysis
- Ensuring compliance with industry regulations and standards
- Providing accountability to your Board of Directors and other stakeholders
Now is a good time to start gathering the necessary documents for this audit, including:
- Retirement plan adoption agreements
- Payroll records
- Investment statements
- Participant loan payment information
When the DOL asks to review your work, you may be understandably nervous. Remember that this audit isn’t a punishment. It’s a regulatory measure to ensure your retirement plan is operating in your employees’ best interests. Among other things, the auditing party checks to see if employee contributions and company distributions are handled correctly and in a timely manner. The audit also reviews the protocols involved in participant eligibility and employee loans.
As an employer, a common deficiency in employee benefit plans that you should keep in mind is related to the timely remittance of employee contributions. When an employee withholds funds from their paycheck and designates them for their 401(k) account, it is the responsibility of the employer to remit those funds in a timely manner. Holding those funds for a week is basically the same as the employer taking an interest-free loan from their employees.
The DOL has been clear in their guidance that if payroll taxes can be remitted in the matter of a few days, they expect 401(k) contributions to be remitted in the same timeframe.
Once your audit is complete, be on the lookout for a management recommendation letter that addresses any compliance issues and necessary improvements to your retirement plan. Remember that this audit is a chance to make sure your retirement plan is functioning at the highest quality.
If we can assist you further with your 401(k) plan and audit, please call us at (317) 608-6699 or email Eric.