Your 401(k) plan crossed the audit line. Here is what happens next.
Once a plan starts its year with 100 or more participants holding a balance, its Form 5500 has to come with an independent audit. For a plan crossing for the first time that is its first audit, and it starts from the filing you already made.
What a first auditor looks at
None of these is unusual, and each has a known way of being resolved. What matters is finding out before the auditor does, while there is still time to deal with it calmly.
Contributions that reached the plan late
Money withheld from paychecks has to reach the plan as soon as it can reasonably be separated from company funds. The filing asks whether any was late, and an auditor tests the deposit dates against payroll. Late deposits are corrected by putting the lost earnings back, and a program run by the Department of Labor covers the paperwork.
A fidelity bond that is missing or too small
The people who handle plan money must be covered by a bond of at least 10% of the funds they handled the year before, within limits. The filing reports the bond, so a missing or light one is visible before anyone asks. The answer is usually a call to the broker.
Corrections the filing already reports
Refunds to employees after a failed nondiscrimination test, and other correcting payments, appear on the form. An auditor will want to see how each was worked out and that it was paid, and asks why when the same correction comes back year after year.
Answers on the form that contradict each other
The filing describes the plan's features in codes, and those codes have to agree with the plan document and with the numbers. A code that claims a feature the plan does not have, or misses one it does, is among the first things an auditor reconciles.
See what your own filing shows
Type your company name. This reads your plan’s most recent public Form 5500 filing, the same record the Department of Labor holds, and shows where you stand and anything an auditor will ask about.
Free, no signup, and we do not email you afterwards. The search runs in your browser, so your company name is never sent to us.
Read from your plan’s most recent public Form 5500 filing, through the Department of Labor’s EFAST2 system. If you have corrected something since you filed, this page cannot see it yet, which is good news rather than bad. Participant counting follows the rule in force since the 2023 plan year, which counts participants holding an account balance rather than those merely eligible. General information, not legal or accounting advice.
What to do now
- 1
Confirm the count that decides it
The rule counts participants holding an account balance on the first day of the plan year. Above 120, the audit is required. Between 100 and 120, a plan that filed as small the year before may keep filing that way while the count stays at 120 or below. Your recordkeeper can give you the number in a few minutes.
- 2
Look at the filing the auditor will start from
Your last Form 5500 is public. Everything on this page about late deposits, the bond and reported corrections can be read from it today, which means it can be dealt with before fieldwork rather than during it.
- 3
Engage an auditor early
A first audit also has to get comfortable with where the plan started, so it asks for records from before the year being audited. Firms book up ahead of the filing deadline, and a first audit takes longer than the ones after it.
Fifteen minutes before your first audit
We will tell you what your auditor will flag and how it gets resolved. We’re building an audit firm for ERISA 401(k) plan audits, so this is the view from the auditor’s side of the table. No pitch and no follow-up sequence.
The correction work itself belongs with your TPA or recordkeeper: whoever audits a plan cannot also be the one who fixed it.
1. Of 4,817 plans whose 2024 or 2025 Form 5500 was the first to show 100 or more participants holding a balance, that still filed as a small plan and had filed no audit opinion from 2022 to 2025, 2,357 had at least one flag an auditor will examine. Among the 1,810 above 120 participants, whose audit cannot be deferred, the share was 55%. Read from the Department of Labor’s public EFAST2 filings. A flag is a question an auditor will ask, not a finding that something is wrong. General information, not legal or accounting advice.