The 401(k) plan audit is mandated by the Employee Retirement Income Security Act (ERISA) and is intended to make sure a plan is being run correctly. The audit seeks to: … Determine the accuracy of info reported in the plan’s Form 5500 and 401(k) financial statements.
Subsequently, does my 401k plan need an audit?
If a company’s 401k plan has 120 eligible participants on the first day of the plan year, an audit is required. Once an audit has occurred, the 401k plan must be audited every year after that until the eligible participant number drops below 100.
Also, why are 401k plans audited?
The primary purpose of the audit is to ensure that the 401(k) plan is operating in accordance with Department of Labor (DOL) and Internal Revenue Service (IRS) rules and regulations as well as operating consistent with the plan document, and that the plan sponsor is fulfilling their fiduciary duty.
What happens if you fail a 401k audit?
Consequences of Nondiscrimination Testing Failure
No matter the cause, you‘ll need to act to fix the issues. If you don’t, your plan can lose its qualified status. That means that all the tax benefits related to your 401(k) plan would go away, and you and all of your employees could be left with a hefty tax bill.
How much will an audit cost? For small to medium size business (plans under $50 million in assets), we see average annual audit costs of $8,000 – $12,000. We have even seen auditors that charge over $18,000 for a plan audit. HealthEquity Retirement benchmarks new auditors each year to find capable, efficient auditors.