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  • Writer's pictureMichelle Marsh

How to Prepare for a Retirement Plan Audit: Tips and Best Practices

Retirement plan audits are an essential part of maintaining compliance for plan sponsors. However, the thought of undergoing a plan audit is also a daunting one if you're not sure what to expect. Understanding how to effectively prepare for and communicate during these audits helps ensure your company remains compliant and avoids potential penalties. Let's go over the useful tips and best practices you need to navigate the audit process smoothly.

close up of desk with laptop, spreadsheet, glasses, and magnifying glass as person uses calculator to perform a retirement plan audit.

An Overview of Plan Audits

A retirement plan audit is a comprehensive examination of a retirement plan's financial records and operations. It is typically conducted by an independent auditor to ensure compliance with Internal Revenue Service (IRS) and Department of Labor (DOL) regulations. The purpose of the audit is to safeguard the retirement savings of employees and ensure the plan’s integrity.

Non-compliance with plan audit requirements leads to significant consequences and usually results in penalties, legal ramifications, and potential harm to your employees' retirement savings. Thus, it’s wise to be proactive and properly prepare for the audit process.

Best Practices for Audit Preparation

Maintain Accurate and Up-To-Date Records

Keep your plan's financial and administrative records well-organized and easily accessible. This includes records of contributions, distributions, investments, and participant data. Accurate recordkeeping is important because it demonstrates compliance and aids in answering auditor questions.

Review Plan Documents and Procedures

Thoroughly review your plan documents including the summary plan description (SPD), and any amendments. Ensure your operational procedures align with the plan provisions. Identify any discrepancies or potential compliance issues and be proactive in addressing them.

Stay Updated on Regulatory Changes

The retirement plan landscape is constantly evolving, with new regulations and requirements frequently introduced. Stay aware of these changes by subscribing to industry expert newsletters, reading blog articles, and working with a CEFEX Certified third-party administrator (TPA).

Perform Periodic Self-Audits

Conducting internal audits allows you to identify and address any compliance issues before the independent audit. Review your plan's operations, procedures, and internal controls to ensure they align with regulatory requirements. Self-audits help you identify potential areas for improvement, reducing the risk of non-compliance.

Business woman leaning over desk at computer while she performs a plan audit on her own organizaiton.

Periodically doing a self-plan audit allows you to identify and correct any potentially hazardous compliance issues.

What to Expect During the Plan Audit

During the audit process, you’ll want to effectively communicate with the auditor. Here are a few tips to make the audit go smoothly:

Engage with Your Plan Auditor Early

Once you receive notice of an upcoming audit, establish communication with the auditor promptly. Understand their expectations, timelines, and requirements. This early engagement will facilitate a more streamlined and efficient audit process.

Designate a Point of Contact

Appoint an individual within your organization to act as the main point of contact with the auditor. This person will gather the necessary documents, facilitate information flow, and address any questions throughout the process.

Deliver Requested Items in a Timely Manner

Respond to your auditor’s questions promptly and provide all requested documents and information accurately. Cooperating with the auditor helps build a positive relationship and expedites the audit process.

Prepare for On-Site Visits

In some cases, auditors may conduct on-site visits to review documents and interview key personnel. In this case, you’ll need to ensure all relevant records and documents are easily accessible. Provide the auditor with a suitable workspace and any necessary assistance during their visit.

The Benefits of Hiring RPCSI for Plan Audit Support

Preparing for a retirement plan audit requires proactive planning, organization, and effective communication; and though these tips and best practices are smart to follow, it doesn't change the fact that the process is still a time-consuming task. That’s where RPCSI comes in. When you partner with our team of experienced consultants, you gain access to dedicated professionals well-versed in retirement plan audits who will alleviate the burden of completing the audit process and maintain the compliance of your retirement plan.

Remember, a well-prepared and compliant retirement plan not only protects your employees' financial future but also strengthens your company's reputation and credibility. Stay proactive, be compliant, and navigate retirement plan audits with confidence. Reach out to our team of experts and let us help you meet your retirement plan audit requirements today.

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