Definition
A plan audit is the annual examination of an ERISA-covered retirement plan's financial statements by an independent qualified public accountant, required for large plans and used to support the financial-statement schedules that accompany the plan's Form 5500 filing.
Why it matters
The plan audit is the mechanism by which the plan's financial statements are independently verified before they are filed with the Department of Labor. For a participant, the audit is a structural check on the accuracy of the plan-level financial information underlying reported account balances, contributions, distributions, and expenses. For the sponsor and the fiduciary, an audit deficiency is a compliance exposure of its own.
How it works
ERISA § 103(a)(3)(A) requires plans with 100 or more participants at the beginning of the plan year to include audited financial statements with the Form 5500 filing. For plan years beginning on or after January 1, 2023, defined contribution plans count "participants with account balances" rather than eligible participants for purposes of determining audit-required status, a change that reduced the number of small DC plans required to obtain an audit. An 80-120 participant rule allows plans transitioning across the threshold to continue their prior filing status (large or small filer) if the count remains between 80 and 120, avoiding annual reclassification. The audit is performed by an independent qualified public accountant under generally accepted auditing standards, with a scope covering plan assets, contributions, benefit payments, and administrative expenses. Two audit levels historically existed — full-scope and limited-scope; the SECURE Act replaced the limited-scope audit with a "Section 103(a)(3)(C) audit" that carries specific disclosure and procedural requirements for certified plan investments.
In practice
A participant does not receive the audit report directly, but the audited financial statements are part of the public Form 5500 filing and can be accessed through DOL's public disclosure system. Reviewing them is a way to verify the plan-level integrity behind the account statement the recordkeeper produces. For sponsors, audit selection and oversight are themselves fiduciary decisions — the auditor's qualifications, independence, and specific plan-audit experience determine whether the audit actually surfaces the operational issues it exists to surface. A qualified audit opinion or a material weakness finding is a signal that the plan committee should investigate before the next annual filing.
Related terms
- Form 5500
- Plan administrator
- ERISA fiduciary
- Fee disclosure (ERISA 408(b)(2))
- Participant fee disclosure (ERISA 404(a)(5))
- Investment committee
- Plan committee
- Group annuity contract