The Importance of Retirement Plan Audits
It’s mid-July and it would be a massive oversight to not spend some time discussing one of the biggest tasks for Retirement Plan Sponsors, that have a July deadline (on a calendar year basis). One vital aspect of ensuring the health and effectiveness of your retirement plan is conducting an annual retirement plan audit. Retirement plan audits are typically required for employer-sponsored retirement plans that fall under the purview of the Employee Retirement Income Security Act (ERISA). These audits commonly apply to retirement plans such as 401(k) plans, 403(b) plans, profit-sharing plans, defined benefit pension plans, and employee stock ownership plans (ESOPs). These plans often have significant assets and may involve complex administration, making them subject to rigorous oversight.
Identifying Operational Inefficiencies and Errors:
Retirement plan audits serve as a valuable tool for identifying operational inefficiencies and errors. By reviewing plan documents, administrative procedures, and participant data, audits can uncover discrepancies, inaccuracies, or potential areas for improvement. These audits help you identify and address issues promptly, ensuring the smooth functioning of your retirement plan and minimizing the risk of future complications.
Mitigating Legal and Financial Risks:
Conducting regular retirement plan audits helps mitigate legal and financial risks. By identifying and addressing any compliance issues or operational deficiencies promptly, audits reduce the likelihood of costly legal disputes, penalties, or adverse regulatory actions. Furthermore, audits provide a proactive approach to risk management, ensuring your retirement plan remains in good standing and aligned with industry best practices.
Ensuring Compliance and Fiduciary Responsibility:
Retirement plan audits are crucial for maintaining compliance with ever-evolving regulatory requirements. By conducting audits, you demonstrate your commitment to upholding fiduciary responsibilities and adhering to the rules and regulations set forth by the ERISA. Audits provide an opportunity to review plan operations, assess compliance with relevant laws, and identify any areas that require attention or corrective action
By conducting an annual retirement plan audit, where appropriate for the size of your retirement plan, you demonstrate your commitment to fulfilling fiduciary responsibilities, protecting participants' interests, and mitigating legal and financial risks. If you're looking for a Retirement Plan Advisor to help you start or manage your retirement plan, email us today, Christina.Tunison@lpl.com. If you require assistance with getting started, or an existing annual retirement plan audits, we're here to help guide you through the process and help you optimize your plan's performance.
This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
#458033 July 2023