At Sensiba San Filippo (SSF), we perform many employee benefit plan audits annually, serving clients across throughout California. For many organizations an annual 401(k) audit is a necessity. If you’ve ever been involved with an employee benefit plan audit in the past, you probably aren’t looking forward to your next one. At SSF we can make the process minimally invasive and as painless as possible.
Our 401(k) audit team brings more than twenty-five years combined experience, allowing us to deliver superior client service and proactive communications throughout the engagement.
We have a results focused, value-centric approach to our 401(k) services. We serve a wide range of clients from middle market companies to international Fortune 100 companies, with plan size ranging from initial year audits to 35,000 participants. We use feedback from our clients and staff to simplify and streamline every aspect of the audit process. As a result, we are able to deliver improved project timelines and cost efficiencies.
Here are a few things we’ve learned along the way. Follow these eight steps and you’ll be on your way to a painless 401(k) audit.
1. Get an Early Start
Federal law requires employee benefit plans with 120 or more participants to have an audit performed as a part of their annual return filing. Sponsors of small plans can also mitigate risk and ensure proper management of their plans with an independent plan audit. Your Form 5500 is due by the last day of the seventh month following the close of the plan year. For example, if your plan ends on December 31, your deadline is July 31. If you are required to complete a 401(k) audit, it’s always best to get an early start on the process.
2. Have a Clear Plan
A clear, well thought out plan is essential to an efficient audit. You have control over the auditor you select and therefore the plan they implement. A good plan should set clear expectations of what is expected from each party. That would include a detailed timeline of critical events: dates scheduled for kick-off meetings, fieldwork, and financial reporting. Throughout the process, the plan should provide for very clear methods of communication and frequent status updates. You should always know where you are in the process. Lack of communication and poor adherence to timelines leads to bottlenecks and wasted time, which can mean last minute filings.
3. Be Prepared
Ask your auditor for a preliminary list of the information you will need. Be sure that you understand each item on the list.You will also need to have access to your 401(k) administrator website. If you need the assistance of your 401(k) administrator, be sure you know who will be helping you, that they are aware of your needs and your audit timeline.
4. Schedule Regular Updates
The amount of information and the number of tasks/people involved in a benefit plan audit necessitates frequent communications. Have frequent, scheduled update calls where you involve all parties to participate and resolve outstanding questions. These updates will ensure that questions are resolved quickly and efficiently—keeping the audit on schedule.
5. Don’t Over-Test
Testing is an essential component to the audit. Over-testing and repeated site visits by auditors can stall the process. Ask your auditors to explain both testing requirements and their timeline for testing. Be prepared for onsite testing, interviews and walk-throughs. If your staff is not available when auditors are scheduled to visit, the timeline and efficiency of your audit can be compromised.
6. Know Your Time and Personnel Requirements
It’s always good to know how much time your team will need to spend on the project. Your time involvement is a hidden cost of the project. Ask prospective auditors how much time you should expect to spend internally supporting the audit. Make sure they work with you to keep your time investment to a minimum.
7. Work with Experience
It’s a common practice for many auditors to place their youngest auditors on employee benefit plan audits. This leads to several problems. Working with inexperienced auditors every year means spending extra time getting to know your auditor and learning how to communicate with them. Different plans can have different terminology; it is essential that you and your auditor are speaking the same language. Ask your auditor who the team members are and what their experience with plan audits has been. Request some continuity amongst the project team.
SSF has a consistent 401(k) audit team who has received specialized training to stay current on ERISA, DOL and IRS rules and regulations.
8. Finish Early
Have you ever noticed how much you can reduce stress by finishing early? Planning to have your audit completed well in advance of the deadline will make the process less stressful. Building in some cushion before your deadline will mean small hiccups will not become major problems.
At Sensiba San Filippo, we have vast 401(k) audit experience, serving clients across Northern California, from start up’s to large multi-national sized corporations.
We are committed to maximizing the value we bring through exceptional client service. That means providing the highest quality audits while building relationships with our clients. This relationship allows for the transfer and utilization of knowledge and value.
If your current 401(k) plan audit is a source of frustration and stress, we can show you a better alternative. It’s never too early or too late to get started.