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From the Affordable Care Act (ACA), to the Employee Retirement Income Security Act of 1974 (ERISA), and beyond, there is a complicated web of rules and regulations that apply to your employee benefit plans. Making sense of all of these laws, crafting the perfect benefit plans, and ensuring compliance can seem daunting to even the most experienced Human Resources or Finance professional.

If you’re preparing for an employee benefit audit, it’s normal for concerns about compliance to be heightened throughout your organization. In this post, the employee benefit plan audit experts at DHJJ cover the basics of what you need to know about the process. Read on to learn more.

What is an Employee Benefit Audit?

Generally, if your company has over 120 eligible participants (not just employees actually enrolled, but all employees who could participate if they wished to), you must undergo an annual employee benefit audit. This requirement is mandated by the DOL (the United States Department of Labor). If you are a growing business, this may be the first time you’ve needed to conduct an employee benefit audit.

The best course of action is to hire a team of experts to conduct your employee benefit audit, including a CPA (a certified public accountant). A proper and comprehensive audit ensures that your company is financially able to fund your employee benefit plans, pay benefits, and meet your obligations to your employees when the benefits are owed. It’s also a critical measure to take before you complete your annual Form 5500 filing.

Documents Required for Employee Benefit Audit

The first step: hiring an experienced CPA firm that you trust to audit your employee benefit plan. The next step: getting together everything the firm will need to conduct your audit. Below, we’ve outlined the core materials a professional audit team will need to get started.

Keep in mind that the following list is not all-encompassing, and your audit team may let you know that they need a bit more information from you. As you’re making your way through this list, also remember that if you haven’t had a great written record retention policy in place (which is common for most businesses that started off small), now is a great time to start.

If you run into issues finding some of the documents or information listed below, don’t forget to check with any third party that you may have contracted with in order to administer or run your plan. Some documents may be held by the plan sponsor or accessible via a third party’s online portal.

1. Information on your plan’s participants

Your audit team will need a few key employee data points, including the basics: your employees’ names; their employee classification; the date they were hired and/or fired; the date they enrolled in a benefit plan; identifier information such as their birthday, social security number, and data regarding their compensation, eligibility, and contributions. These data points are crucial to conducting an accurate audit.

2. Payroll data

Your audit team will analyze your business’ payroll data as part of the review of your employee benefit plan. Payroll data gathered from timecards and wage records help in determining employee eligibility and contribution limits.

3. Employee enrollment forms and contribution information

Supplying your audit team with your employees’ enrollment forms will help the team understand contribution parameters, and it also helps confirm that employee contribution selections match the actual contributions that were made. If you have a rollover contribution and/or employee match policy, supply your audit team with any information you have about those processes, including calculations and payment records. Your audit team will make sure everything checks out on these ends.

4. Distribution and loan information

Do your employees ever need to take money out of their 401k or other accounts (i.e., take a “distribution”) or borrow against their accounts (i.e., take a loan)? If so, provide any and all documents you have regarding loans and distributions to your audit team. Your team will make sure you’ve been following loan and distribution protocols correctly.

6. Plan governance and documents

Supply your audit team with all documents covering plan governance, including the actual plan document and any amendments, contracts, or resolutions. You’ll also need to gather any information you may have about decisions your business has made in regard to the employee benefit plan, including internal policies and even minutes from meetings. If there are any service providers involved with your employee benefit plan, such as a third-party administrator, an insurance company, or a trustee, provide a list of these parties to your audit team. Taken altogether, this information will help your audit team sign off on the plan administrator’s proper exercise of their fiduciary responsibilities.

Employee Benefit Plan Audit Checklist

The audit of employee benefit plans will look slightly different for each company being audited. However, there are general guidelines for the process that do tend to stay the same.

As we mentioned, the first step is getting an audit team together. Aside from your CPA firm and your organization’s HR and Finance Departments, you may also need to involve legal counsel, particularly if your employee benefit plan is complex.

The team will analyze your organization’s compliance with federal laws, such as those mandated by the DOL and the IRS, as well as state requirements specific to your company’s location and operations area.

The audit team will also examine the following:

  • Participant information
  • Financial statements
  • Loan information
  • Benefit payments
  • Employer and employee contributions
  • Administrative expenses
  • The liabilities associated with and obligations required by the plan
  • The accuracy of the Form 5500

While this may seem like an intimidating and arduous process, hiring a great audit team to guide you through will help ensure that your organization is in good hands and nothing slips through the cracks.

DHJJ: Your Employee Benefit Plan Audit Team

Looking for a great audit team? You’ve found one in DHJJ. DHJJ is a member of the Employee Benefit Plan Audit Quality Center (EBPQAC) with the AICPA to keep up with best practices for businesses in Chicago and throughout Illinois. Our knowledge of the EBP industry and technical expertise set us apart from other firms in the Chicago area to ensure a high-quality audit. With experience in running employee benefit plan audits for Illinois companies, DHJJ delivers a proven process that delivers the required reports and targeted recommendations. Contact us online or give us a call at (630) 420-1360 to get started.


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