The Employment Retirement Security Income Act of 1974 (ERISA) requires that companies with over 100 employees file an annual 401(k) audit to verify that you are meeting the requirements of your plan and protecting employee interests. Compliance with ERISA ensures that the assets of the plan are fairly valued and that contributions and payments have been distributed in the appropriate manner. This is why it’s critical that you hire a certified public accountant that knows plan administration, ERISA laws, and 401(k) audits inside and out.
Your accounting firm is likely a lifeline when it comes to managing your business. Some CPA firms act as a controller or CFO and some provide advisory services aimed at helping businesses grow. While it might seem easier to partner with one firm to handle all of your financial needs, it may not be the wisest choice when it comes to something as critical as the annual 401(k) audit.
The specificity required to “get this right” means that you should hire a specialist. If this is something your current CPA is not well versed in, it could result in:
- higher fees for the audit
- longer turnaround time
- more HR support
- IRS and Department of Labor penalties if filed late or not done correctly
If you already have a trusted CPA relationship, don’t be afraid to have this conversation with them. They understand that clients don’t want to pay five figures for an annual audit but also don’t want to say “no” to you for fear of losing your business. If your CPA doesn’t perform at least 60 audits per year, then 401(k) audits are not a core part of their practice and they’re more of a liability headache than a profit center. These firms would happily outsource or refer this piece of business to another 401(k) auditor if they understand that you still value the other services they expertly provide year-round.
The filing deadline for the 401(k) audit is October 15 and while a couple of months may seem like a lifetime away, it is important not to let the audit wait until the last minute. Instead, give yourself time in this fiscal year to course-correct and avoid errors that will trigger the IRS.
Talk with the key stakeholders in your organization about the monetary and legal implications of the 401(k) audit, have an honest conversation with your CPA firm about their capabilities and cost, and identify alternatives to vet them against. Companies like PriceKubecca focus on delivering affordable, high-quality audits, and have developed processes and technology that cannot be duplicated by traditional firms.
