Top Ten Audit Issues for Retirement Plans

Top Ten Audit Issues for Retirement Plans

Following is a short list of common issues plan sponsors often face when undergoing an audit from the DOL or IRS. The good news is these issues can typically be avoided with the proper plan design and operation protocols in place. 

Definition of Compensation – Compensation as defined in the plan document vs. compensation used to calculate deferrals and allocations.

Updating the Plan Document – Plan document not updated for PPA or subsequent amendments (discretionary vs. required).

Employee Eligibility – Allowing participants into the plan too early or too late, improper exclusion of part-time employees, independent contractors or controlled group employees.

Plan Loans – Not following the proper plan loan procedures, not making payments according to the amortization schedule, and maintaining loan documents.

In-Service Distribution Rules – Distributions made for impermissible reasons or too early including not following hardship withdrawal procedures.

Distribution Paperwork – Providing the proper paperwork for distributions including a special tax notice with the correct payment options. Is spousal consent required? Handling cash-out of small balances.

Testing – Not properly testing the plan under ADP/ACP nondiscrimination, top-heavy and 401(b) testing or making the appropriate corrections for a failure.

Vesting – Failure to provide 100% vesting at retirement, death or disability, not properly accounting for years of service or breaks in service.

Minimum Required Distributions – Failing to notify participants age 70 ½ of minimum required distributions or processing them timely.

QDRO Procedures – Not following the plan’s qualified domestic relations order procedure.

If you need assistance with any of these items please contact your Employee Benefit Specialist or one of our retirement plan consultants:

Tim Thurston, AIF®
Manager, Retirement Plan Services
(214) 443-2410

Tammy Woodman, QKA, AAMS®
Defined Contribution Consultant
(214) 292-4123


The information provided is for educational purposes only. This information is from sources we believe to be reliable, but we cannot guarantee or represent that it is accurate or complete. The opinions are those of the writer, and the opinions and information presented are subject to change without notice.

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