April 21, 2026
Employee benefit plan audits are an annual requirement for many organizations that sponsor retirement or benefit plans and meet certain size thresholds. These audits exist to help protect plan participants and ensure that assets are handled in accordance with regulations. The audit is performed by an independent CPA firm, separate from the organization’s internal accounting function, and understanding what auditors look for is the first step to maintaining compliance. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
An employee benefit plan (EBP) audit is an independent review of a plan’s financial statements and operations. It tests to see if the plan is functioning in accordance with its governing documents and ERISA requirements. Common plans subject to audit include:
In general, plans with 100 or more eligible participants at the beginning of the plan year are considered large plans and must include audited financial statements with the annual Form 5500 filing. For retirement plans, the 80-120 participant rule provides some flexibility, allowing a plan to continue filing in the same category as the prior year as participant counts fluctuate. Plans with fewer participants are typically treated as small plans and may file without an audit
An audit typically involves direct interaction with the staff members responsible for plan administration. Auditors use this time to understand how the plan operates day-to-day, including internal controls, payroll processes, and areas where errors or noncompliance are more likely to occur.
Fieldwork also includes detailed testing. Auditors select samples of plan activity and request supporting documentation to confirm that transactions were handled correctly and in accordance with plan provisions. Within that process, auditors review several high-profile areas, including:
Plan Documentation — Plan documents need to reflect the way the plan is administered. If a law is changed or an amendment is issued, the plan must be updated accordingly. Auditors often review operations against the plan to check for alignment. Plan sponsors may want to consider running a quarterly check-up to ensure that new rules, like those from SECURE 2.0, have been implemented and recorded correctly.
Auditors also look to see that plan fiduciaries are actively overseeing the plan and that decisions are being made in the best interest of participants. This may include reviewing meeting minutes and any other communication related to plan administration.
Eligibility and Plan Participation — Participant data needs to be accurate in the system. Dates of birth, hire dates, termination dates, and hours worked determine when employees become eligible and how benefits are calculated. This includes employees who qualify under long-term, part-time (LTPT) rules. Auditors review this information closely because errors can lead to a host of problems, including inaccurate retirement contributions. This type of error is usually caused by simple data entry mistakes. Standardized procedures or investing in automated systems across departments can help increase compliance.
Remittance of Contributions — DOL rules state that contributions must be remitted as soon as reasonably possible after being withheld from payroll. Delays in depositing employee deferrals or employer contributions can result in serious compliance issues. There are two proactive opportunities for correction before the audit, including the Self-Correction Program and the Voluntary Fiduciary Correction Program. Even with correction options, late remittance remains a common audit finding. Penalties and interest may apply.
Nondiscrimination Testing — Retirement plans must pass nondiscrimination testing to show they do not favor highly compensated employees (HCE). An HCE is generally someone who owns more than 5% of the company or earned more than $160,000 in the prior year (for both 2025 and 2026). Employers may also use a top-paid group election to limit HCE status to the top 20% of employees by pay.
Auditors review plan documents to see that all employees are classified correctly, and they also review the average contribution percentages for each group to confirm they fall within permitted limits. If the plan fails testing, it must be corrected immediately. Penalties may be issued, depending on the timing of the correction.
Form 5500 Reporting — Most plans must file Form 5500 each year. When auditors are involved, they review the form to confirm that financial data, participant counts, and required disclosures are consistent with the audit. Form 5500 is generally due July 31 following the end of the plan year, unless an extension is filed.
For a successful EBP audit, plan sponsors may want to take the following actions:
Contact Us
Understanding what EBP auditors review can make the process more efficient and reduce the risk of complications or worse penalties. Working with an experienced plan auditor can streamline the process. If you have questions about the information outlined above or need assistance with your next benefit plan audit, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.