401k Audit – Is Your Company Prepared?

If you currently sponsor a 401k plan for your employees, you should be aware of the accounting and audit responsibilities that are an essential part of the program. Commitment to this retirement program demonstrates your focus on employee welfare and retention, but it also requires a strong strategic approach to be successful. Performing an annual 401k audit for reporting purposes is a crucial part of the program.

Employing an Independent Auditing Firm

Larger companies usually have a staff of CPAs and an accounting firm on retainer to ensure that the company’s 401k program is kept in compliance and that the associated Form 5500s are filed properly. They perform an annual 401k audit to keep the company’s plan organized and using best practices.

Smaller and medium-sized companies usually can’t afford to hire a full-time qualified staff to conduct their own 401k audits. Working with a highly qualified independent accounting firm to perform a 401k audit is critical to ensure best practices and avoid expensive, time-consuming activity to comply with IRS standards. A properly audited plan is essential to avoid IRS fines and penalties, and will save you time over the long run.

Preparing for an Independent 401k Audit 

Your independent auditors should be highly experienced and knowledgeable about all IRS and Department of Labor regulations related to 401k programs. Since these individuals will be delving into the inner elements of your business, you should adequately prepare in order to make their job easier. Time is money. Ensuring a speedy process saves you money in paying less of their time and also minimizes disruption to your office’s day-to-day activities.

Suggested preparation steps:

  1. Interview and select an independent auditing firm with substantial experience with 401k audit compliance.
  2. Organize a group of key personnel with detailed knowledge of the plan documentation for their area of responsibility. One person should chair the group and set the expectations and guidelines.
  3. Committee should organize 401k audit documentation according to a consistent format for each department or subset of the company.
  4. Provide a Summary Plan Description.
  5. Provide a list of participants with their current status.
  6. Create a Summary of Asset Records.
  7. Do the numbers add up? A calculation of total salary paid in the prior year against the sum of participant contributions and withdrawals to ensure that the balances are accurate.
  8. Eligibility: are all participants eligible according to your plan guidelines? Are all program loans in compliance?
  9. Provide copies of Forms 5500 from the previous three years.
  10. Provide a copy of the Fiduciary Liability Policy.

Talk With Ernst Wintter & Associates About Your 401k Program Audit

Once you have determined that your company needs an audit, contact Ernst Wintter & Associates. Our mission is to make the process as painless as possible and to relieve you of any fear of an IRS or Department of Labor audit. Our CPAs in Walnut Creek will discuss all aspects of the audit and ensure that the process is performed efficiently with minimal disruption to your normal daily routine. Call us today for all of your accounting needs.