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401(k) Plan Self-Audit

Published by Kim Moore on Jul 20, 2020 6:00:00 AM

As the Plan Sponsor of a 401(k) Plan, you have a fiduciary responsibility to the Plan participants to ensure the 401(k) is administered properly and that the Plan remains compliant with all rules and regulations. We recommend Plan Administrators take a few minutes periodically to do a self-audit of the Plan procedures to ensure they remain compliant and they can correct any potential errors early to avoid costly fine and penalties.  What should you consider in a self-audit?

  1. Review your copies of all the plan documents and governing documentation over the Plan. Verify you have signed copies. Review the most current documents and ensure you understand all the provisions. Then, verify all the procedures currently in place adhere to these provisions.

  2. Review the individuals that have plan level access to the Plan. Remove anyone that should no longer have access. Review the access levels and remove any access that is not strictly needed.401k Self Audit

  3. Complete a review of all employees listed on the Plan Census. Make sure all employees are included and the demographic information is correct (birth date, hire date, termination date, etc.) for a sample of employees. Ensure newly hired employees are included even if they are not yet eligible to participate in the Plan.  Review for the designations Highly Compensated and Key. If you do not understand these items, check with your service provider and make sure you have designated these employees correctly.

  4. Review the fidelity bond in place for the Plan. Make sure it is still in-force and that it covers 10% of Plan assets.

  5. Review your practice for disseminating key documents to Plan participants such as the Fee Disclosure and Summary Annual Report. Verify you have kept copies of these documents and that they have been disseminated per requirements.

  6. Verify your Plan Compliance Calendar is up-to-date and you are current on all the required tasks.

  7. Ask some of your employees for their thoughts on the Plan. Are they aware of the Plan? Do they have complaints about the Plan?  Is there something you help them better understand about the Plan?

  8. Review the Investment Lineup and performance. Consider making changes if you believe a better diversified lineup would enhance the offering or if funds are under-performing their peers.

  9. Review fees charged to make sure they are reasonable compared to other Plans.

  10. Reconcile the contributions to your payroll reports, bank statements or company general ledger to identify missed deposits, or potential differences. Follow-up with your service provider if you identify any unusual items.

  11. Review the internal controls for your plan especially related to eligibility, distributions and loans to ensure you have all the bases covered to prevent errors and/or fraud.

Although this is a long list and may take some time to work through, it is a good investment of your time to ensure your Plan remains compliant. If you would like to discuss Summit CPA Group’s audit process in detail or need an audit, contact our office at (866) 497-9761. We can help you navigate the world of the 401(k) audit as proficient as possible. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.

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