This blog was originally written by our KorePartners at Assurance Dimensions. View the original post here.
Your 401k audit requires the work of multiple key players with different roles and responsibilities. It’s a team effort to ensure your benefit plan audit is seamless, timely, and accurate. Let’s outline the service providers and how you will work with them for your next 401k audit.
Custodian
The custodian of a 401k plan has the legal obligation to act in the sole interest of the plan participants. The custodian will make fund decisions in the best interest of the plan participants, without regard to the interests of the employer or plan sponsor.
Third-Party Administrator (TPA)
The 401k plan sponsor hires a TPA to run the day-to-day operations of the retirement plan. The TPA is responsible for calculating vested returns and filing reports to the DOL, IRS, and other government agencies. Overall, the TPA plays a critical role in a 401k audit, as they prepare the annual Form 5500 and have access to the required financial documents necessary for the audit.
Financial or Investment Advisor
Due to the complex nature of 401k plans, many companies employ a 401k advisor or financial advisor to help employers develop and maintain a 401k plan. Their role can involve several responsibilities, including:
- Retirement plan design
- Plan implementation and management
- Oversee quarterly investment meetings
- Provide 401k advice to plan participants
- Assist with the annual 401k audit
- Administrative support related to finances
- Track regulatory and legislative updates that may affect the 401k audit
Recordkeeper
The recordkeeper is the most visible to provider participants. This role is primarily associated with enrolling participants and providing them access to their retirement assets. The role of the recordkeeper is to track the data required for the 401k audit (including contributions and earnings.) The recordkeeper also communicates data to the required parties.
Auditor
The Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code require employers and plan administrators to hire an outside audit firm for an independent 401k plan audit. The auditor will be in charge of administering your 401k audit and preparing audited financial statements of your plan. They should be experienced CPAs who have detailed processes to ensure your benefit plan audit is completed correctly and promptly.
Coordinate and Communicate During Your 401k Audit
Once you have established that your benefit plan needs a 401k audit, the audit team will need to work in sync with all key players of the 401k plan. Since the auditor must collect information from the plan’s service providers and ensure that it is accurate and detailed, this requires coordination and clear communication across all roles in the 401k plan audit. Failure to coordinate could lead to missed 401k plan audit deadlines and compliance penalties.
Hire A Trusted Audit Team For Your 401k Audit
A 401k audit is time-sensitive and has extensive requirements. Hire qualified, certified public accountants to help your benefit plan maintain compliance.