Completing your independent 401(k) plan audit is a big milestone—but it’s not the final step. Once your auditor issues the report, there are still a few key tasks to wrap up on your end as the plan sponsor.
Here’s what happens after the audit is finished, what’s required of you, and how you can use the results to strengthen your plan going forward.
1. Attach the audit to your Form 5500
If this is not your first 401(k) plan audit, you might be thinking… No-brainer! But if this is your first audit, then here’s the deal. First, you’ll file a “large plan” Form 5500, and must include an independent auditor’s report and financial statements with it.
While this is typically handled by your third-party administrator (TPA), accountant, or another service provider, you’re still responsible for ensuring it’s done correctly and on time. (For a guide to your 401(k) plan team, see this article.)
So, make sure to file Form 5500, including final audit report, by the filing deadline (generally July 31, or October 15 with an extension)—or face Department of Labor (DOL) AND Internal Revenue Service (IRS) penalties. (Miss a deadline? We’ve got you covered.)
2. Review the audit results with your plan committee
After the audit, your auditor will outline any findings—such as internal control recommendations, compliance issues, or operational errors.
This letter is not just for the “circular file!” Above all, bring it to your plan committee for review. After that, discuss the auditor’s feedback, identify any patterns or recurring concerns, and make sure everyone understands what needs to change going forward.
And finally, if there were no findings? Celebrate! And then document that, too. (The non-finding… not the celebration. What happens at the party, stays at the party…!)
Pro tip: Keep committee meeting minutes summarizing the review and any follow-up actions discussed. It’s a good governance practice and your fiduciary responsibility as plan sponsor.
3. Address internal control recommendations
Many audit letters include suggestions for improving internal controls. Although these recommendations aren’t mandatory, they will help prevent errors from happening again. Whether you act on them directly or pass them to a service provider for implementation, be sure someone owns the follow-through.
Accordingly, here are questions to ask your provider:
- Who’s responsible for implementing the changes?
- How will we monitor whether the control is working?
- Do we need to update our procedures or checklist?
4. Document any corrections made during the audit
Suppose the audit uncovered an error, like a late deposit or a missed deferral. In that case, you must not only correct it, using appropriate correction programs available from the DOL and the IRS (usually in coordination with your TPA), but also document how it was fixed and why it won’t happen again.
The DOL and IRS expect plan sponsors to keep a documentation trail showing:
- What the issue was
- How it was corrected (with dates and amounts)
- What procedural changes were made to prevent a recurrence
Keep this documentation with your annual audit files. It will save you the hassle of digging up proof when your auditor asks for it, come audit time!
5. Use the findings to prepare for next year
An audit can do more than satisfy a regulatory requirement—in truth, it’s also a valuable tool for improving plan operations. Start preparing thus:
- Create a calendar of compliance deadlines
- Review onboarding procedures to ensure new hires are enrolled correctly
- Meet with your TPA or payroll provider to fix any recurring issues
- Document “lessons learned” to keep your audit smoother next year
A few things your auditor is responsible for:
- Performing the audit per generally accepted auditing standards
- Issuing the independent auditor’s report with financial statements
- Communicating findings and recommendations in writing
- Responding to reasonable follow-up questions from plan management
That said, your auditor isn’t responsible for filing your 5500, correcting plan errors, or implementing operational changes. That stays with you and your service providers. As in, “Hmm, that sounds like a you problem.” 😅
Final word? You’re not done when the audit ends
Once the audit report is finalized, the real value comes from what you do with it. Following the guidance in this article helps strengthen your plan—and puts you in a better position next year.
Need help interpreting your results or figuring out next steps? At Cassell Plan Audits, we specialize in clear, practical guidance that helps you get real value from your audit. Contact us today.
Photo by Jeff Stapleton
