As a seasoned plan sponsor, this is not your first audit. Here is a quick-and-easy checklist for your next 401(k) plan audit so you catch what may have changed—on your side or the regulatory side — to ensure that your next audit is as painless and efficient as possible.
If this is not your first 401(k) plan audit, this article is for you! Intended as a quick review to catch the bits that most frequently fall through the cracks, this checklist focuses on what may have changed since your last audit and how to prepare for your next one.
If this IS your plan’s first 401(k) plan audit, check out next month’s article, “How to prepare for your first 401(k) audit.”
Is an independent audit still required for your 401(k) plan?
A 2023 DOL policy change vastly reduced the number of plans required to have an independent auditor review. This year’s audit will be the first that the new rules apply to.
Once upon a time, 100 eligible participants in your plan meant you were considered “large” and triggered the audit requirement. Now, “large” is defined as a plan with 100 or more participants who carry a balance in their 401(k) at the start of your plan year. In other words, they actively participate and are not simply eligible to participate.
- Determine the number of 401(k) plan participants with balances as of the first day of your last plan year. Pro tip: Don’t forget to include terminated employees.
- Change in status? Contact your auditor to discuss and determine whether there are specific steps you need to take.
- No audit required? Consider this recommended alternative to ensure continued compliance: agreed-upon procedures.)
Any changes to your 401(k) plan policy, provider, or platform?
- Adjust for new 401(k) plan limits as the IRS sets. Here are the highlights that employers should be aware of.
- Policy changes? Gather documentation of any executed amendments to the plan document and summarize any significant modifications.
- New administrative personnel? Notify your auditor of any new point of contact. Gather documentation of changes to the team overseeing your plan, along with administrative meeting minutes.
- New payroll provider? Import and retain any historical data from your former provider. If you missed this important step, here’s what to do so you don’t get caught out of compliance.
- New 401(k) plan tech or platform? Know where to find the audit trail your new system produces, like documentation of participant changes to their elections. If no such trail exists, take these recommended next steps immediately.
- New cybersecurity program or policy? Ensure you have this documentation as it applies to your 401(k) plan data.
Any of these organizational changes?
- Any M&A activity? A merger, sale, or acquisition may have added new 401(k) plan participants or transferred others; gather the pertinent documents. Review the steps you need to take to make sure you’re covered come audit time.
- Have records gone digital or moved? Ensure you still know where to find your 401(k) plan’s documents, especially older records like original plan docs and terminated employee files.
- Purge of old records? Make sure to hold on to documentation for terminated employees who still participate in your 401(k) plan. They still count!
Discover any mistakes or gaps? Not to worry. We’re here to answer your questions and help you prepare. Contact Cassell Plan Audits today.
