Plans with more than 100 participating employees with account balances as of the start of the plan year are legally required to undergo an annual audit. Participating employees with account balances include active participating employees with an account balance as well as terminated participating employees with an account balance. Please see our article "Does My Plan Need an Audit?"
There are two types of audits:
A full-scope audit examines all areas of the plan, such as operations, compliance, and investments, and the auditor prepares a full, unqualified opinion, which is filed with Form 5500.
A limited-scope audit examines those same controls but relies on a bank, trust company, or other qualified institution for certified financial statements and excludes them from the auditor’s opinion about the plan.
We will let you know after the end of your plan year if we believe your plan is required to undergo a plan audit. You can also check on the number of participants in your plan at any time by monitoring your participant count on the homepage of the sponsor portal so that you are aware that your plan is approaching the 100-participant account balance threshold.
There are benefits and drawbacks to each audit type. In general, a limited-scope audit is less expensive, but it will not provide you with the comfort of a full-scope auditor’s opinion that your plan is operating in compliance with all applicable legal and tax requirements. It is your decision whether to complete a full or limited-scope audit and to secure and pay for the auditor’s services. Either way, your plan will need an auditor to sign a report regarding it. In order to prepare and file your plan’s Form 5500, we need your auditor’s report at least two weeks before the Form 5500 deadline so that we can file it on time.
If you decide to complete a limited-scope audit, Vestwell can provide you with a certified valuation of plan assets for certain plans on our platform. Vestwell will provide up to four hours of assistance to your auditor at no additional charge to help with either type of audit. This is all explained in Appendix B and C to your Plan Services Agreement.
For sponsors undergoing a plan audit for the first time, here is some practical advice to make the process a little easier.
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Collect important documents. The auditors will want to see documentation to show benefit payments, deferral changes, and all other employee and employer contributions. On your plan sponsor portal, you can find your Plan Adoption Agreement, amendments, contract with Vestwell, and various plan communications.
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Revisit your plan documents. It’s a good idea to review your plan document and periodically confirm that you understand your plan’s features. Then, take the next step and make sure you are operating your plan consistently with the documents. If there are any mismatches, it may be worth considering amending your plan. We can assist you. Any errors that are detected should be corrected as quickly as possible.
- Plan ahead and find an independent auditor. Your company’s accountant may be able to prepare the auditor’s report. If not, you can find one using the directory published by the Department of Labor.
Whether your plan undergoes a limited or full-scope audit, the goal of any audit should be to confirm that your organization has implemented sufficient internal controls to operate your plan in compliance with applicable regulations. Vestwell’s compliance team is ready to assist with your annual audit.