Selecting the Best 401(k) Auditor

If your business has 100 or more eligible participants at the beginning of the plan year, you must undergo a 401(k) audit. However, choosing the wrong auditor can have severe consequences for both you and your employer. Therefore, it’s crucial to pick the right one for your business.

Our team at PriceKubecka has compiled a summary of essential tips to help businesses find a quality plan auditor for their next 401(k) audit.

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How to Select the Right 401(k) Auditor

Many factors go into choosing the right 401(k) auditor. Be sure to take your company’s individual needs and circumstances into account before settling on one CPA.

Price

Most CPAs charge either an hourly or a flat fee. In most cases, it’s better to go with a straightforward, flat-fee pricing structure, so you know exactly what you’ll be paying before the audit occurs.

For example, PriceKubecka offers a flat-rate pricing structure that takes into account the size and complexity of a 401(k) plan to offer a low, affordable price. While other CPAs have hourly pricing structures, PriceKubecka makes it easy for companies to know exactly how much their audit will cost.

You can learn more about what your 401(k) could cost you here.

Technology

Technology can have a huge impact on the process of an audit. While most auditors use manual audit programs and require the client to perform all information gathering, PriceKubecka uses proprietary software that allows for a 100% remote audit.

Our powerful technology, Autire, connects directly to your record keeper to assist in gathering data so there is no need for you to spend hours fielding questions and emailing documents. As a result, 401(k) audits take less of your time, are less error-prone, and most importantly, cost less.

Experience

Experienced auditors will have performed hundreds of 401(k) audits and therefore, have better knowledge of plan design and service provider nuances that are integral to the 401(k) audit. Many CPA firms use interns or inexperienced professionals to work on 401(k) audits, which makes those audits prone to errors and too many unnecessary questions. When sourcing a CPA, ask how many audits they performed in the past and who will be working on them throughout the process.

PriceKubecka never uses interns as part of our auditing team. Instead, every auditor is a licensed CPA with extensive experience and our work is peer-reviewed via the AICPA.

Process

As the saying goes, time is money, which is why it’s so important for companies to minimize the time and hassle spent on an audit. Compared to traditional auditing methods, companies that employ high-tech software drastically reduce the hassle of the auditing process. Rather than spending weeks collecting information, data gathering can be completed in a matter of hours. Instead of taking up space in your offices (particularly during the pandemic), continually asking for documents, the 401(k) CPAs at PriceKubecka complete the entire process remotely. Moreover, technology paired with expert human resources ensures a high level of accuracy that you can trust.

Conclusion

Don’t take a chance on an inexperienced 401(k) auditor. Even if you already have a CPA, find an experienced 401(k) auditor so disruptions to your current workflow are minimized.

What should you know next? Read New Rules for Limited Scope Audits. The new rules create additional responsibilities for both plan sponsors and auditors.

Frequently Asked Questions

What should I do if I missed the October 15 Form 5500 deadline?

First, confirm that October 15 was actually your plan’s deadline and that a valid extension applied. If the deadline has passed, determine what is preventing the Form 5500 from being completed. If a required 401(k) audit is unfinished or hasn’t started, contact an experienced employee benefit plan auditor immediately and work with your other advisors to determine the appropriate filing and penalty-relief options.

Can you file Form 5500 after the deadline?

Yes. A delinquent Form 5500 can still be filed after its due date. Filing late does not eliminate the filing requirement, however, and potential DOL and IRS penalties may apply. Eligible plan administrators may be able to use the DOL’s Delinquent Filer Voluntary Compliance Program to reduce certain penalties.

What are the penalties for filing Form 5500 late?

The Department of Labor may assess substantial civil penalties for failure to file a complete and accurate Form 5500. Current Form 5500 instructions state a potential DOL penalty of up to $2,739 per day. The IRS can separately assess $250 per day, up to $150,000 per plan year, for certain late Form 5500-series filings. Actual penalties and available relief depend on the circumstances.

What is the DOL's Delinquent Filer Voluntary Compliance Program?

The DFVCP is a Department of Labor program that allows qualifying plan administrators to voluntarily submit delinquent Form 5500 filings and pay reduced civil penalties. Eligibility generally requires correcting the filing before the DOL has provided written notice of the failure to file.

What if my 401(k) audit hasn't started and the Form 5500 deadline has already passed?

If your plan is required to have an independent audit, missing the Form 5500 deadline does not remove that requirement. Contact an employee benefit plan auditor as soon as possible, explain that the filing is already late and determine what records are needed to begin the audit immediately. Work simultaneously with your TPA and other advisors to address the delinquent filing and determine whether penalty-relief options are available.

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