When a business reaches a certain number of eligible participants for their 401(k) plan, federal law requires an independent audit of that retirement plan. Larger companies are more accustomed to this annual requirement. However, owners and managers of growing businesses may never have experienced a 401(k) audit or don't know enough about it.
You probably have a lot of questions if you’re about to undergo an audit for the first time. At what point is an employer required to complete a 401(k) audit? What is an "eligible participant," and why is this important? Who performs the audit, and what documents do they need?
A little homework will help you determine whether or not a 401(k) audit is required. Plus, it’ll help you better prepare for one.