Insights into Employee Benefit Plan Audit Selection – It Starts and Ends With the Plan Sponsor

You’ve heard time and again that retirement plans are the responsibility of Plan sponsors, no matter how good third party service providers are. That is why IRS and DOL plan investigations always start with the Plan sponsor.

In a recent video presented by 401kTV and The Plan Sponsor University, viewers learn just what the IRS looks for when selecting plans for investigation and what to do when receiving your investigation letter. SC&H Group’s Employee Benefit Audit Services team breaks down key things Plan sponsors should understand when questioning why their Plan was selected to be audited.

Audit Triggers

Investigations are normally triggered by the following scenarios:

  • Complaints from disgruntled employees or from discrepancies or unusual trends identified in the Form 5500.
  • Differences between beginning balances and prior year ending balances on Form 5500 could instantly trigger an investigation.
  • The number of plan participants – the IRS prioritizes plans with more than 2,500 participants, part time employees, high levels of leakage through loans and in-service and hardship withdrawals, and plans with a lot of difference asset categories or large amounts reported on Form 5500 as “other income”.
  • Employers sponsoring 403(b) plans, 457 plans, and multiemployer plans are also major targets for DOL investigation.

You’ve Been Selected – Now What?

If you are selected for an investigation, you will get a letter from the IRS or DOL. Read the letter immediately and identify the important dates and items requested. Then consider consulting with your third party administrator, auditor, accountants, and possibly legal counsel.

Good preparation can benefit you greatly once an investigation begins and keeping a close eye on your plan now can prevent future investigation altogether.

Contact SC&H Group’s Employee Benefit Plan Audit Services team here to learn more about what to expect if you receive a letter, and how to make sure your retirement plan is compliant and audit-ready.