What Is an ERISA Plan Audit?
At its core, an ERISA plan audit is an independent review of the benefit plan's financial statements. It can be taken into consideration as a yearly checkup for your plan's data as well as reporting, linked directly with the Form 5500 filing. For employers, this covers retirement offerings like 401(k)s & ESOPs and pension plans.
What does this audit mean?
An ERISA plan audit is a yearly evaluation by an independent qualified public accountant. This applies when the plan fulfills a specific filing threshold. The auditor examines the plan's finances and participant activity as well as compliance. Then, their report attaches to the Form 5500.
Which plans require this kind of review?
ERISA governs retirement and welfare plans. Here, we look at the retirement side — since that is where Form 5500 questions arise for employers. Because of this focus, you will hear many professionals refer to an employee benefit plan audit when discussing these engagements.
When is an ERISA audit required?
The ERISA audit requirements vary with your participant count, the type of plan offered, and specific filing rules. A plan with fewer than 100 participants at the beginning of the plan year counts as a small plan. On the other side, 100 or more makes it a large plan.
For defined contribution plans, participants with account balances are counted. You do this at the start of the year. A first-year filing is parallel to the end-of-year count. A special 80-120 rule exists. This lets eligible plans keep their prior-year status. Short plan years also change the filing path.
Your 401(k) plan requires an audit — when it surpasses the large-plan threshold. It is only skipped if you get a small-plan waiver. Small pension plans bypass the annual audit if they fulfill DOL waiver conditions. These rules cover the qualifying plan asset test & participant disclosures.
What does the auditor review?
The auditor does more than check your math. They look at the plan financial statements as well as the source records. DOL materials point to specific items. These contain contributions and benefit payments as well as participant data. Required schedules also form a core part of an employee benefit plan audit.
Auditor targets the points outlined below:
- Employer & employee contributions
- On-time deposits
- Participant eligibility & census data
- Loans and distributions along with hardship withdrawals
- Investment activity & year-end values
- Fees paid by the plan
- Financial statement disclosures
- Consistency between the books & the Form 5500
The auditor leverages these records to support the financial statements and notes alongside schedules attached to the filing.
What is the point of the audit for the plan sponsor?
An ERISA plan audit gives a formal record. It proves an independent professional looked at the reporting package. The main leverage is reliable reporting for the regulators & your participants and management team. The Form 5500 series functions as a reporting framework. It gives participants & regulators access to real plan facts.
DOL rules tie the accountant report to the Form 5500 filing. Current Form 5500 instructions specify what to attach: the auditor report, financial statements, notes, and schedules. This happens when the filing contains Schedule H.
What is an ERISA Section 103(a)(3)(C) audit?
A Section 103(a)(3)(C) audit is the modern term. You see it in current Form 5500 materials. It replaces the older "limited-scope audit" label. DOL filing instructions ask filers a specific question. They ask if the audit falls under ERISA Section 103(a)(3)(C). AICPA guidance explains the next steps. Your management team assesses if this election is allowed. They also check if a qualified institution properly prepared and certified the investment data.
The auditor still has work to do. They evaluate the noncertified parts of the financial statements, review management's assessment, examine the certification itself, and confirm the certified information fits the plan's reporting package.
How should a plan sponsor get ready?
Preparation is critical, as these engagements are record-heavy. The DOL presents guidance on selecting an auditor & reviewing their work. A smoother process takes the data and a clear request list into consideration.
A practical prep list is exemplified as below:
- Confirming the participant count & filing status early
- Gathering the plan document, amendments, and prior-year filing
- Reconciling census data with payroll & your recordkeeper
- Tying trust statements to the general ledger.
- Reviewing late contribution issues before fieldwork begins
- Collecting support for loans and distributions as well as investment activity
- Assigning one internal contact to manage all auditor requests
Why work with Dimov Audit?
Dimov Audit presents independent audit services for US organizations — managing these specific engagements linked with Form 5500 reporting. If you require a clear read on the filing status, audit readiness, or the scope of the ERISA plan audit, we are here to assist. Reach out to Dimov Audit team today.
FAQs
Do all 401(k) plans need an audit?
No. Many smaller plans do not need one every year. And some might qualify for a waiver if DOL conditions are satisfied.
What does the auditor review?
The auditor reviews the plan’s financial statements, participant data, contributions, distributions, and other important data. The target is to support the reporting attached to Form 5500.
What is a 103(a)(3)(C) audit?
This is the modern term for a specific ERISA audit approach. It covers certified investment data. It replaces the older "limited-scope audit" label in current instructions.
How can a plan sponsor prepare?
Start early. Confirm participant count, collect plan documentation, and reconcile payroll & census records. Quality preparation makes the audit smoother.
