10 Easy Tips to Prepare for Your 401(k) Audit

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

If your company’s 401(k) plan requires an audit this year, here are ten things you can do to help you prepare for, and pass your 401(k) audit.

1. Gather all plan documents including new amendments that were made during the current year.  Your auditor will ask for them, so you might as well pull them together now.

2. Obtain a copy of the plan census from your plan administrator.  Reconcile the total salary on the census to your payroll records.  If it doesn’t tie out, investigate the discrepancy. 

3. Check to see if your fidelity bond is sufficient.  Fidelity bonds should be enough to cover at least 10% of the net plan assets.  Most plans’ net assets are increasing each year, but it is very common to overlook increasing the fidelity bond. 

4. Every plan should have certain individuals who have been charged with governance of the plan.  If they have not had a meeting regarding the plan during the previous year, they should schedule a meeting and keep minutes of the meeting to provide to the auditors.

5. Refer to the plan’s loan policy for restrictions on participant loans.  Scan the loans that are currently outstanding to make sure none of them appear to be non-compliant with the plan’s policy.

6. Refer to the plan document or adoption agreement for the definition of eligible compensation.  Once you have this information, pull up a copy of your most recent payroll, select a few individuals, and check to see if all of their “eligible compensation was included in the calculation for deferrals.

7. Gather your supporting documentation early.  Once the auditors arrive they may require a lot of your time with requests for additional documentation.  Gather the documents that they request as soon as you have their list.  This will take stress off of you during the audit and allow you to help the auditors with new requests.

Any audit can be stressful, but with advance preparation the burden is always lighter. 

Rex Platt