Managing a company’s 401k or other retirement plan audit can be a challenging task.
Ask anyone who is responsible for working with the audit firm and they will tell you it can be time-consuming to meet the multiple and ongoing requests made throughout the process. Retirement plan auditors are required to review several aspects of a plan’s operations, policies, and financials, so it’s no surprise they need access to various types of information. In addition, they may also need documentation needed to validate records and other information provided. Although it may seem overwhelming the good news is that through prior preparation the audit process can be much easier. To help clients, prospects, and others, Hanson & Co. has provided a broad summary of information which is most commonly requested by plan auditors below.
Retirement Plan Audit Information
- General Plan Information – This includes key details about the plan’s operation, including copies of the latest plan documents and trust agreements, summary plan description, sample enrollment packages sent to employees, minutes from board/committee meetings, proof of plan bonding and parties of interest including the plan recordkeeper, payroll provider, plan investment/custodian, trustee and sponsor. You may also be asked to provide information on the number of eligible participants at the start and end of the year, copies of agreements with service providers and contact information for all individuals, including third parties, involved in plan management and operations.
- Plan Internal Controls – This may include copies of job descriptions, accounting manuals and internal controls documentation of payroll and human resource systems. You may also be asked to include a copy of the SOC 1 report for relevant third-party administrators (TPA) and service providers along with plan responses to identified controls.
- Financial Reporting – The information requested in this category often includes year-end reporting packages from your TPA, draft copies of the financial statement, state of changes in net assets available for plan benefits, notes to the financial statement, supplemental schedules and draft copies of the Form 5500.
- Cash and Investments – Requests may include a copy of the financial policy statements, statement of plan assets at plan year-end, bank statements, copies of contracts/policies for insurance contracts, list of pending trades, list of outstanding loans (and if loans are permitted) and range of interest rates on outstanding loans.
- Contributions and Rollovers – This includes key details about contributions and rollovers to the plan in the audit year. Information requests often include payroll records for each location in the plan, details of employee and employer contributions including loan repayment dates, reconciliation of employee deferrals and employer match contributions and details of plan rollovers.
- Participant Information – This is information the auditor will need to perform participant level testing. This often includes salary information, Form I-9, plan enrollment or opt-out form, timecards, payroll registers, loan request forms, distribution request form, loan request form and rollover contribution request form (when applicable).
Proactive planning and open communication are essential to ensure you are ready for the plan audit and reduces the chance of unwelcome surprises. If you have questions about preparing for your next benefit plan audit or would like assistance with your 2017 audit, Hanson & Co. can help. For additional information please contact us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.