(HR) Checklist: Documents needed during a 401(k) plan audit

When clients get an audit request letter from the Employee Benefits Security Administration they usually call me surprised at the amount of information being requested. It is not just the shock of being audited that impacts them, but the amount of information they need to provide.  Sometimes, the requested documentation may not be available, which creates its own set of issues. But for planning purposes, I thought it would be beneficial to lay out the list from the most recent audit request I reviewed.

Plan sponsors of defined contribution plans will likely be required to produce the following in response to an audit:

1. Plan documents and all amendments, including trust documents and summary plan descriptions (which reminds us these should exist and amendments should be formally written and adopted).
2. Summary annual reports for the period under review.
3. Fiduciary insurance and bond policies.
4. Internal income and disbursement statements.
5. IRS determination letters.
6. Meeting minutes for committee or subcommittee meetings (which suggests there should be meetings regarding plan administration).
7. Plan financial records, including account statements and ledgers.
8. Service provider contracts.
9. A sample participant benefit statement.
10. RFPs disseminated showing the process for hiring plan professionals.
11. Form 5500s.
12. All documents related to service provider fees, including fee schedules and compensation paid to professionals by the plan.
13. All documents related to costs charged to the plan.
14. Documents identifying fiduciaries, including their dates of service.
15. Any ERISA compliance policies or procedures adopted by the plan or sponsor.
16. All documents related to plan investment performance (which includes an investment policy statement).
17. All documents related to administrative expenses (direct or indirect) related to the plan.
18. Documents showing the names and service times of board members and officers of the plan sponsor.
19. Documents showing timeliness of employer contributions and repayment of participant loans.
20. Documentation showing the procedure for handling participant loans, if applicable (because loan administration and repayment of loans is a frequent issue in audits).

As you can see from this list, there are certain documents that relate to the plan (like plan documents) and certain information related to the sponsor. Plus there is a lot of financial data that has to be provided. The time to see if you have this required information is before you receive the audit request. So consider this list as a test. If there is a request here that you could not satisfy if you were undergoing an audit, now is the time to locate that information. And if it is documentation that needs to be created, don’t hesitate to ask your attorney for assistance.

Keith R. McMurdy is a partner with Fox Rothshild focusing on labor and employment issues; he can be reached at kmcmurdy@foxrothschild.com or (212) 878-7919.

The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

Source: Employee Benefit Adviser