business Working with a Third-Party Administrator? Why You Still Need an Independent EBP Audit March 31, 2026 From tracking contributions to ensuring compliance with IRS and DOL regulations, managing an employee benefit plan can be overwhelming. Many plan sponsors turn to TPAs to help manage these responsibilities. But does working with a TPA eliminate the need for an independent employee benefit plan (EBP) audit? Not quite. Quick Takeaways A TPA manages plan operations but does not provide independent assurance.Many plans are required to obtain an independent audit under Employee Retirement Income Security Act (ERISA) once participant thresholds are met.Independent audits help identify errors, compliance gaps, and fiduciary risks that TPAs may not detect.Plan sponsors, not TPAs, are ultimately responsible for plan compliance and reporting. Why it MattersEven when a TPA handles day-to-day administration, plan sponsors retain legal responsibility for compliance and participant protection. An independent audit provides critical oversight, helps uncover hidden issues, and reduces fiduciary risk.What Does a Third-Party Administrator Do?A TPA is typically responsible for the day-to-day administration of an employee benefit plan. Depending on the scope of services, this may include:Processing employee and employer contributionsMaintaining participant recordsPerforming nondiscrimination testingPreparing Form 5500 and related schedulesAdministering distributions, loans, and eligibility trackingTPAs play a vital role in plan operations, but their role is administrative, not evaluative.Do You Still Need an Independent Audit If You Use a TPA?Yes. While TPAs are essential to keeping plans running smoothly, they are not independent under auditing standards. An EBP audit requires an objective evaluation performed by a qualified CPA firm that is independent from plan administration.Key distinctions between TPAs and independent auditors include:Independence: Auditors must be independent of plan operations; TPAs are directly involved in them.Scope: Audits assess whether financial statements are presented fairly and whether the plan complies with ERISA and DOL regulations.Accountability: Auditors report findings to plan sponsors, helping them fulfill fiduciary responsibilities.In short, TPAs execute plan processes; auditors evaluate whether those processes are functioning as intended.Do ERISA Requirements Still Apply?Absolutely. ERISA requirements apply regardless of whether a plan uses a TPA. Generally, under ERISA, plans with 100 or more participants at the beginning of the plan year must include an independent audit with their Form 5500 filing. Engaging a full-service TPA does not eliminate this requirement.Importantly, the plan sponsor (not the TPA) is legally responsible for:Selecting and monitoring service providersEnsuring timely contributionsFiling complete and accurate Form 5500sSafeguarding plan assetsAn independent audit supports these responsibilities by providing an added layer of oversight and accountability.Risks an Independent Audit Can Help IdentifyEven well-administered plans can experience issues that go unnoticed without an audit, such as:Late or improperly remitted employee contributionsEligibility or exclusion errorsIncorrect employer matching calculationsInconsistent application of plan provisionsWeak internal controls or insufficient documentationIdentifying these issues early can reduce the risk of DOL penalties, amended filings, and fiduciary exposure.How TPAs and Auditors Work TogetherAn independent audit is not an indictment of your TPA. Rather, it’s a complement to their work. In fact, experienced auditors regularly coordinate with TPAs to obtain records, understand processes, and streamline testing.When roles are clearly defined:TPAs focus on administration and compliance executionAuditors provide independent assurance and insightPlan sponsors gain confidence in the integrity of the plan
