What is the rule for audits? If your plan has over 100 eligible Participants at the beginning of the Plan Year, you must attach an audit report prepared by a CPA to your Form 5500 filing. In certain circumstances you can avoid the audit requirement if you have up to 120 participants at the beginning of the year.
How is the participant count determined? A participant is an Employee who has met the Eligibility requirements for your plan, whether or not they choose to participate. It also includes former employees who still have an account balance in the plan at the beginning of the year.
What will the auditors do to prepare their reports? Discuss the scope of the audit with your auditor, but in general they will perform the following functions:
When will the audit take place? We must complete our Annual Administrator’s report before the audit can begin. The auditors typically require 4-6 weeks before your Form 5500 is due to complete their work.
How much will the audit cost? Again, discuss costs with your audit firm. The cost will depend on the number of participants, the number of locations, and how the assets are held. First year audits are typically more expensive than subsequent years due to the set up process.
The following checklist is designed to help you prepare for a plan audit:
For more Retirement Plan Audit help, download the Guide below and give us a call. You will want to make sure that someone can speak on your behalf to the Auditor. Also, see our related blog post on Avoiding a Plan Audit (and cutting costs) for a possible solution so that you can avoid an audit altogether!