An accountant reviewing changes to 401k plan audit requirements on his laptop


If you are a benefit plan sponsor, your 401k plan audit requirements will be changing this year. In July 2019, the AICPA Auditing Standards Board issued new performance requirements for benefit plan audits subject to the Employee Retirement Income Security Act of 1974 (ERISA). We will give you a brief overview of what this new rule entails and its impact on your 401k plan audit.


What Is the New Accounting Standard?

The AICPA, which establishes U.S. auditing standards, issued Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. This new accounting standard was designed to clarify the responsibilities of the auditor and plan management during an engagement. This standard also provides additional transparency in reporting.


ERISA Section 103(a)(c)(3) Audit Introduction

SAS No.136 introduces the ERISA Section 103(a)(c)(3) audit (previously known as the limited scope audit). While a limited scope audit resulted in a disclaimer of opinion related to certified investment information, under ERISA Section 103(a)(c)(3) audit, there is now a two-pronged opinion covering the audit and whether certified investment information included in the financial statements agrees to the certification. 

After the conclusion of this type of audit, CPA auditors will be required to report in writing any “reportable findings.” Reportable findings include instances of non-compliance or suspected non-compliance with laws or regulations and any results that the auditor assesses as significant and relevant to those charged with governance and/or internal control deficiencies that the auditor determines merit management’s attention. 


New 401k Plan Audit Requirements for Plan Management

SAS outlines new management responsibilities before an ERISA audit. Management of the benefit plan should determine whether the plan qualifies for an ERISA Section 103(a)(c)(3) audit. The company’s leadership can work with its third-party service providers to make this determination.

If a benefit plan qualifies for an ERISA Section 103(a)(c)(3) audit, then a company should obtain and evaluate the investment information and certification obtained for the plan year. Upon reviewing the certificates, a company may realize that it needs to implement new procedures to ensure compliance with SAS 136. Documentation should be produced and maintained to demonstrate management’s compliance with the preconditions of SAS 136.


Updated Responsibilities for the 401K Plan Audit Team

The updated changes under SAS 136 expand auditor responsibilities before, during, and after the conclusion of the audit. For example, benefit plan auditors will now be expected to:

  • Perform engagement acceptance procedures by obtaining management’s acknowledgments and inquiring how management determined that the benefit plan qualified for an ERISA 103(a)(c)(3) audit.
  • Evaluate management’s assessment of investment certification qualifications.
  • Obtain current plan documents and develop procedures to determine whether the plan is following plan provisions.
  • Read the substantially complete draft of Form 5500 to identify any material inconsistencies in the audited financial statements.
  • Evaluate and communicate reportable findings in writing, with detailed descriptions for each discovery.

These expanded responsibilities may result in an auditor spending additional time on an audit. However, these expanded responsibilities will result in a higher level of assurance for the benefit plan.


Preparing For This New 401k Plan Audit Requirement

Benefit plans ending after December 14, 2021 (i.e., December 31, 2021, plan year-end audits) are now required to follow this new auditing standard. Therefore, it is crucial to work with an experienced retirement plan audit team to ensure success.

At Assurance Dimensions, we work with businesses ranging from 100 to 10,000 employees. As a result, you can confidently rely on our experienced audit team, knowing we complete hundreds of these benefit plan audits annually.

Contact us today to help your organization to meet its 401k plan audit requirements.


Man holding stack of papers reading about the 401k plan audit deadline and changes to the 401k plan audit requirement