November 20, 2015

Are You Subject to a Retirement Plan Audit?

by: Brian Davis, CPA

Recently, the U.S. Department of Labor has increased its efforts to monitor employee plans, resulting in an audit process that is increasingly complex and lengthy. Organizations are under intense scrutiny as more regulations and reporting requirements must be stringently followed for employee benefit plan audits.

Are you sure you need one?

First, let’s review the requirement for having an Employee Retirement Income Security Act (ERISA)-mandated audit. All retirement plans that have 100 or more eligible employees (participants) at the beginning of the year are considered to be “large” retirement plans. Large plans are required to be audited each year and have audited financial statements sent with the Form 5500 filed with the U.S. Department of Labor.

Are there any exceptions?

There is an exception called the 80-120 rule. This ruling allows plans with between 80 and 120 participants, as of the 1st day of the plan year, to file the Form 5500 in the same category (Large or small plan) as indicated on the prior year Form 5500 filing. Therefore, if you filed as a small plan in the prior year, you may continue to do so until you have over 120 participants at the beginning of the year.

What is exactly done during an audit of a retirement plan?

Auditing a retirement plan involves testing contributions, distributions, investment earnings, ending investment values and various compliance requirements such as the timeliness of transmitting employee deferrals to the plan’s trust.

What should I look for in choosing the right CPA firm?

When choosing a firm, obtain multiple quotes and ask what value they bring to the audit process in addition to completing a basic audit.  When selecting one, you should avoid CPA firms who provide an extremely low quote (Remember, you get what you pay for!) and should look for a firm that belongs to the AICPA’s Employee Benefit Plan Audit Quality Center (EBPAQC), which Hobe & Lucas is a participant.    Finally, if you have a prior audit done by another firm and looking to switch firms, the predecessor firm is required by auditing standards to respond to inquiries by the successor firm.

This can be a daunting process, but you need to make sure you feel comfortable with the expertise of the firm.  At Hobe & Lucas, our team will review your plan documents and operations in addition to just performing “the audit” and try to point out areas where we see room for improvement.  Our goal is to provide value beyond expectations and be your full service provider for all your accounting and auditing needs.   

Still have questions or want to talk about your situation?  Contact us at 216.524.8900 or visit our Contact Us page.

Hobe & Lucas Certified Public Accountants, Inc. is a full-service accounting and business consulting firm dedicated to providing clients with exceptional value.

Upload 8879 Make A Payment

Contact Info

6000 Freedom Square Dr #550

Independence, OH 44131


Check us out on BrokerCheck®.

Investment advisory services are offered through Avantax Planning PartnersSM. Commission-based brokerage services are offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Insurance services offered through licensed agents of Avantax Planning Partners. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. The Avantax entities are independent of and unrelated to Hobe & Lucas Certified Public Accountants, Inc.

Although Avantax does not provide or supervise tax or accounting services, our Financial Professionals may offer these services through their independent outside business. Financial Professionals may only conduct business with residents of the states for which they are properly registered. Not all Financial Professionals are licensed to offer all products or services. Financial planning and investment advisory services require separate licenses.