What Is a Retirement Plan Audit?
A retirement plan audit is an independent review of the plan’s financial statements and records as well as daily operations by a qualified public accountant. In other words, the accountant verifies that the plan’s reporting is precise and matches both the plan document & the annual filing rules. For most employers, this is just a routine compliance step linked with the Form 5500. It does not mean the IRS thinks the company did anything wrong.
Professionals sometimes refer to this as an employee benefit plan audit. The target is to support the annual filing with an accountant’s report and locate any mistakes while there is still time to fix them.
When is an annual audit required?
A retirement plan audit is generally necessary when the plan files as a "large plan" and should attach an auditor’s report to Form 5500. For most defined contribution plans, large-plan status is generated at 100 or more participants with account balances at the beginning of the plan year. There is also an 80/120 rule. This rule enables a plan to keep the same filing category as the previous year if the participant count falls between 80 and 120.
Participant counts have the potential to surprise employers. Former team members who still keep money in the plan impact your total number — even if they left the company years ago. One-participant plans follow distinct filing rules.
What are the main 401(k) audit requirements?
Fulfilling the 401(k) audit requirements begins with having the correct data prepared. Accountants require your plan document, signed amendments, trust or custodian statements, payroll records, participant census data, loan files, and distribution support, as well as past filings. They also need evidence to verify that you ran the plan according to its written terms.
The work goes beyond checking math. A retirement plan audit also reviews how the plan functioned throughout the year. The team checks if eligible employees entered the plan on time, if you deposited elective deferrals promptly, if you calculated compensation correctly, and if loans or hardship distributions followed the rules. IRS guidance points to these points as recurring trouble spots for sponsors.
How is this distinct from an IRS examination?
A retirement plan audit is completely distinct from an IRS examination. The audit is a private annual review done by an outside accounting firm under ERISA filing rules. On the other side, an IRS examination is a government review looking at tax compliance.
This distinction is important, as many sponsors hear the word "audit" and worry they are in a government dispute. In almost all cases, that is not correct. Your establishment likely needs this review every year just because of the participant count and filing status.
How does the audit connect to Form 5500?
The review connects directly to Form 5500 because the accountant’s report is a required part of the annual filing package for large plans — which attach Schedule H. The IRS notes the normal due date is the last day of the 7th month after the plan year ends. For a calendar-year plan, that means July 31. It is possible to use Form 5558 to request an extension.
Timing is incredibly important. If the financial statements, certifications, participant counts, or the accountant's opinion are not ready, the filing might face delays. This is why many sponsors gather their data well before summer — instead of waiting for the deadline.
Some plans use an ERISA section 103(a)(3)(C) audit. In such a situation, the accountant relies on a certification for specific assets held by a bank or insurance carrier. Even then, the plan administrator still hires an independent qualified public accountant & attaches the report to the filing
What happens in a first-time 401(k) audit?
A first-time 401(k) audit generally kicks off with a request list, a planning call, and a filing calendar. The team asks for core documents. They compare the payroll reports with the recordkeeper's data, select samples for testing, and follow up on missing items. The first year takes more coordination as you are building the internal process from scratch.
A regular 401(k) audit might reveal missing old amendments, census files that do not match payroll, late deposits of elective deferrals, weak support for distributions, or incomplete loan records. Locating these things does not mean the project will fail. It just means you should begin early & assign one person on your team to keep information flowing to the accountants.
What can plan sponsors do before fieldwork starts?
- confirm the participant count at the beginning of the year
- reconcile the payroll and trust as well as administrator reports
- gather signed plan documentation & amendments
- review late deposits and loans alongside distributions in advance
- assign one internal owner for requests & deadlines and document uploads
Why Dimov Audit for your plan audit needs?
Dimov Audit presents services for US businesses that want a concrete process and direct communication as well as a careful review. If your company expects its first review this year, is unsure about satisfying the filing threshold, or wants a firm that keeps the project moving, reach out to us.
FAQs
What triggers a retirement plan audit?
A plan generally needs an audit when it files as a large plan for Form 5500 purposes. Participant count / the 80/120 rule has the impact that results.
Is a retirement plan audit the same as an IRS audit?
No. A retirement plan audit is a private audit by an outside accountant. An IRS examination is a government review.
What does the auditor review?
The auditor reviews plan financial statements, plan documents, payroll support, participant data, and loans, as well as distributions. Late deferrals / operational errors are general review areas.
When is Form 5500 due?
Form 5500 is generally due on the last day of the 7th month after the plan year ends. For calendar-year plans, that is generally July 31.
Can a plan get more time to file?
Yes. Form 5558 can be used to request an extension if it is filed by the normal due date.
