Why Some Companies Request Specialized Plan Audits


Why do companies request specialized audits for their 401(k)s? The goal of these reviews is to bring flaws in 401(k)s and other defined contribution plans to light. This may help lead to plans that are better managed, more appealing to new hires and key personnel, and more in line with rules and regulations.

Operational reviews may help an HR officer uncover and fix procedural lapses before the DOL or the IRS come calling. These audits are designed to make sure that recordkeeping goes according to the plan document.

Investment option reviews help plan sponsors evaluate investment choices in view of the plan’s IPS (Investment Policy Statement) and assess their scope and financial potential.

Compliance audits aim to confirm that a plan is avoiding prohibited transactions and ERISA rules violations.  These reviews may prove very illuminating if a new plan has been adopted or if an administrator has been replaced.

Fee & Expense benchmarking helps to make sure that whatever fees your plan pays (yes, there are some) are reasonable.  More sophisticated benchmarking even takes your plan's size and even industry into consideration and can arm you with much needed leverage to negotiate your fees.

Disclosure examinations makes sure that everyone is playing fairly.  Anyone working on your plan will need to disclose how they are paid, how much they anticipate making in dollars, what role(s) they fill, and any conflicts of interest.  You'll first want to know that their disclosures are accurate and that nothing is missing.

Governance audits check to see that a plan sponsor is fulfilling its fiduciary responsibility. They also check the degree of transparency in the plan.

A specialized audit may reveal things that have gone unnoticed for years, or conditions that should be improved.
 

 

 

 

 

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