Yes, 401(k)s can be audited. But, before you race to your file cabinet to find your records, let us explain what this means and we’ll dive into what happens in a 401(k) audit.
Federal law requires that 401(k)s and other types of retirement plans to be audited.
The primary objective of a 401k audit is to ensure that the 401k complies with government regulations and the requirements specified within the plan documents.
A 401k audit looks at two major areas:
A big part of the audit is to ensure that the plan is “fair” to all employees eligible for the retirement plan. The 401(k) audit is one way to help regulate this.
But, no reason to be stressed. Use our Evaluator to see if you’re using the right retirement plan type for your company.
There are three steps you need to take to properly prepare for a 401k audit. Doing these steps will save you a lot of time and trouble:
The 401k audit process usually takes about 6 to 8 weeks. It generally includes a short review and information request stage, 2 to 4 hours of information gathering interviews, a review of the preliminary report, and the final delivery of the audit report.
Once your 401k audit is finished, attach the report to form 5500. This annual report, registered with the Department of Labor and the IRS, provides information on your 401k.
Form 5500 comes with 28 pages of instructions, that’s why it’s important to have a good team around your 401k plan to handle this annual requirement.
Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with The Retirement Plan Evaluator.