Does Your Employee Benefit Plan Need an Independent Audit?

If your organization sponsors a retirement or health and welfare benefit plan, you may be subject to an annual audit requirement under the Employee Retirement Income Security Act (ERISA) — and if you're approaching that threshold, it's worth understanding what's ahead before the deadline sneaks up on you.

Who Needs an Audit?

Under ERISA, certain employer-sponsored benefit plans must have their financial statements independently audited each year. In general, this requirement applies to plans with 100 or more participants who have account balances as of the first day of the plan year. Plans that fall below this threshold are typically exempt from the audit requirement, though there are nuances worth discussing with your advisor, especially if your headcount fluctuates near the 100-participant mark or you're relying on a small-plan exemption.

As your organization grows and enrolls more employees in its retirement or welfare benefit plan, it's important to monitor your participant count each year. Crossing the 100-participant threshold can trigger the audit requirement for the very first time, and being caught off guard can mean a rushed process and unnecessary stress.

Why the Audit Matters

An independent audit isn't just a compliance checkbox.

It serves several important purposes:

• Reliability for stakeholders. Plan participants, the Department of Labor, and other stakeholders rely on audited financial statements to confirm that the plan's assets are being properly accounted for and safeguarded.

• Stronger internal controls. The audit process often surfaces gaps or inefficiencies in how a plan is administered, giving plan sponsors the opportunity to strengthen internal controls before small issues become larger problems.

• Regulatory compliance. Filing an incomplete or non-compliant Form 5500 — including a required audit report — can expose plan sponsors to penalties and increased scrutiny.

If You're Approaching the Threshold: Start the Search Early

If your organization is nearing the point where an audit will be required, expect to go through a thorough vetting process to select the right auditor. Not every CPA firm has experience with employee benefit plan audits, and this is a specialized area with its own set of rules, timelines, and reporting requirements.

When evaluating potential auditors, consider:

• Their experience specifically with ERISA employee benefit plan audits

• Their familiarity with your plan type (401(k), pension, health and welfare, etc.)

• Their capacity to meet your Form 5500 filing deadline

• Their communication style and responsiveness throughout the engagement

Starting this process early gives you time to make an informed decision rather than a rushed one.

If You're Already Subject to Audits: Stay on Top of Your Obligations

For organizations that are already required to have their plans audited, it's easy to let the process become routine and lose sight of the details. But ongoing compliance still matters.

Keep in mind:

• Deadlines don't move, even if your organization is busy with other priorities

• Plan documents, participant data, and contribution records need to be organized and accurate throughout the year, not just at audit time

• Changes in plan design, recordkeepers, or third-party administrators can affect the audit and should be communicated to your auditor early

Staying proactive helps ensure a smoother audit each year and reduces the risk of last-minute surprises.

We Can Help

Whether you're facing your first employee benefit plan audit or you're looking for a more responsive, experienced partner for an audit you already undergo each year, our team can help guide you through the process. Contact us today to learn more about how we support plan sponsors with ERISA audit requirements.

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About Bruce & Company, P.S.C.

Founded in 1976 by Gregory T. Bruce, Bruce & Company, P.S.C. is a full-service accounting firm proudly serving clients regionally, nationally, and globally, with our central office located in Madisonville, KY. For more than four decades, we’ve delivered trusted expertise in tax, financial planning, and auditing. Our knowledgeable team is dedicated to providing personalized service and practical solutions to help individuals and businesses achieve their financial goals. Contact us to learn more about how we can support you!