401(k) audit season is quickly approaching. Once your company has 120 or more eligible participants, an independent audit is required and will be each year unless you drop below 100 employees.

The result of your audit often times comes down to your preparation before your audit begins. After you have selected your independent auditor, we encourage to you select a date early to get ahead of the required deadlines. We all know calendars fill up fast!

Now that you know when the deadlines are, you can prepare for what you will need in advance. Take a look at 5 helpful tips to get you ready.

1. Verify when the audit package will be available

One of the first things to confirm is when the audit package will be available with your current recordkeeper. This package will contain items like financial statements. You can also request access for the auditor, so they can pull any reports as needed. The auditor will also need items such as SOC reports which will be provided by the recordkeeper as well. If you changed vendors during the year, additional information may be necessary. Make sure you confirm with the current recordkeeper and your auditor ahead of time to ensure you can get what you need in advance.

2. Review employee census data

Census data is the area that tends to have the most errors, so be sure to reconcile it to your annual payroll data. Accurate census data is critical to the process so reviewing for inconsistencies and missing information will help prevent errors. Be sure to include all eligible and non-eligible employees. Data should be based on the plan year being audited. A list of sample employees will be requested for testing purposes so be prepared to provide additional information like statements, paystubs, tax forms, enrollment forms, and distribution forms.

3. Complete and document non-discrimination testing results

Testing should be completed prior to the audit and you should document final results for the plan. In the event there were any corrections, confirm they were processed prior to the required deadlines, and provide documentation to the auditor.

4. Review remittances to the vendor for contributions

As an employer you must ensure that deferral contributions withheld from employee paychecks are deposited into the plan trust in a timely manner. While this may seem like a simple task, any mistake can be costly to the plan resulting in lost earnings and possibly additional plan penalties.

5. Gather all current plan documents for easy access

A large number of documents are required when going through an audit. Be sure to gather are all of your plan related documents such as the most recent adoption agreement, any amendments made throughout the year, a copy of the Summary Plan Description, Summary Material Modification (if applicable), and copies of your required annual notices (participant fee disclosure, automatic enrollment notification, QDIA, etc.). You may also be asked to provide a prior year 5500, and proof of Fidelity Bond coverage.


Plan compliance is one of the key reasons an audit is required. Use this IRS Document “The 401k Plan Checklist” to help you determine areas you may need to focus on while preparing for your audit.

Getting ahead of these items will provide for a more efficient process and your auditor will thank you! If you have any questions or need guidance, please reach out to your Sequoia 401k Advisor, or connect with them in HRX.

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Pensionmark® Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC). Pensionmark Financial Group, LLC/Pensionmark Securities, LLC and Sequoia Consulting Group are non-affiliated entities.

Colleen Latchic – Colleen is a 401(k) Client Consultant for Sequoia, where she works with our clients to optimize 401(k) plan design, fiduciary guidance, benchmarking, and investment due diligence. In her free time, Colleen enjoys watching her kids play sports, listening to music, or riding her Peloton.