Advisory
Assurance
Tax
Technology
Global Tax
By Loree Dubois
By Joseph Tamburo
Office Locations
Preparing for a First-Time 401(k) Audit
A rapidly growing software company had recently surpassed 120 participants with account balances in their 401(k) plan. The company had never undergone an employee benefit plan audit before and was unsure of its obligations under ERISA and DOL rules. Their internal finance team, although skilled, lacked the specialized knowledge to handle the increasing complexity of their retirement plan compliance.
The company’s HR director received a notification from their third-party administrator that their 401(k) plan would require an audit for the current plan year. The company needed a trusted advisor to guide them through the unfamiliar process, ensure their Form 5500 was accurately filed, and provide guidance on errors if any were noted in the audit process.
First, the KLR team began with a discovery call to understand the plan’s structure, various providers, and explained why an audit was now required. Plans with 100 or more participants with account balances as of the beginning of the plan year are considered a “large plan” and must file an audit report with the Form 5500. Plans with less than 100 are considered a “small plan” and the audit is not required.
However, there is an exception, the “80-120 Participant Rule” which allows plans with between 80 to 120 participants with account balances at the beginning of the plan year, to file the form 5500 with the same category as in the prior year (“large plan” or “small plan”.). As of the beginning of the plan year participants with account balances increased from 110 to 122, therefore, a large plan filing was now required. The company engaged KLR’s Employee Benefit Plan Audit team for an ERISA Section 103(a)(3)(C) audit (AKA limited scope audit).
Successful first time audit with an unmodified audit opinion
Increased understanding among HR and finance teams around their fiduciary role.
On time Form 5500 filing, avoiding penalties or DOL scrutiny
Repeatable audit process established for future years, based on our guidance throughout the audit process
If your plan is nearing the 100-120 mark, or if you’re unsure of your obligations, bring in KLR’s EBP team early. We make compliance clear, manageable, and efficient.
