Nervous apprehension tends to overwhelm new 401(k) audit clients who don’t know how involved they will need to be in the document production for the audit. Often, they are hopeful that one or more of their service providers will “take care of everything” as they promised. The bottom line is that the extent of the plan sponsor’s and each service provider’s involvement in document production depends on how the plan was set up. For example:
- Is the plan bundled or unbundled?
- Is there 360 ﹾ integration between the payroll software and the recordkeeper?
- Is there a third-party administrator (TPA)?
- What services are provided by a 3(16) administrator?
- Is the recordkeeper covered by a SOC 1 report?
- Is the payroll company covered by a SOC 1 report?
- Is the investment advisor a 3(21) advisor or a 3(38) advisor?
- Are participant elections kept on paper or entered electronically on the webstation?
- Does the auditor have remote access to the recordkeeping webstation?
- Does the auditor have remote access to the payroll software?
The answers to the above questions determine who will provide the information we need to complete the audit, and as such, the extent of each party’s involvement in the document production process. Regardless of who provides each item, we’ve compiled a list of reports that comprise most of the documentation we need to complete a retirement plan audit. Understanding which service providers are responsible for each aspect of the plan’s operations is crucial in assigning each item to the appropriate person.
