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Selecting a Retirement Plan Auditor

Is Selecting an Auditor a Fiduciary Decision?



The Department of Labor has weighed in on this topic quite a bit as of late and is “encouraging” plan sponsors to put more thought behind who you select and why.  So in other words, the Department of Labor believes this to be a fiduciary decision.


The Department of Labor issued a report that reviewed a number of retirement plan audits.  The results suggest that there is a higher probability that your audit is not in compliance unless your auditor conducts over 100 audits a year. From the report, “Auditors that performed the fewest number of audits had a 76% deficiency rate.”  To put this in perspective, there are about 7,330 different auditors that conduct a plan audit.  7,239 of these firms audit less than 100 plans.  With 5,203 of these firms auditing 5 plans or less. Among other things, the report suggests that unless an auditor conducts over 100 audits, there is a higher chance of deficiencies.


Why is this important to plan sponsors?

If the audit report is deficient, the Department of Labor can reject the entire Form 5500 filing.  This can result in penalties for late filing of the return.  Also, the Department of Labor could go after the plan sponsor for improper selection of a service provider.

We have heard that the Department of Labor has identified and sent a letter to plans that use an auditor that does not audit more than 100 plans.


What Should Plan Sponsors Do?

The Department of Labor has a compliance tool that they suggest should be used for due diligence. This would be a helpful questionnaire to have your auditor complete to document your due diligence. In addition to the questions in the tool, we would suggest that the following questions be asked of the auditor:

  • How many plan audits are conducted each year?

  • What type of training (specific to ERISA audits) do your auditors receive?

  • Does your Peer Review include a review of plan audits?

  • Is your organization involved with the American Institute of CPA’s (AICPA) Employee Benefit Plan Audit Quality Center?

If you need assistance with developing this questionnaire, please contact us.

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