If you have a 401(k) retirement plan for your employees, compliance with Department of Labor (DOL) regulations is crucial—not just to avoid penalties but to make sure the plan remains a safe and trusted benefit for your workforce. One key compliance component for many businesses is the 401(k) audit.

At Odoni Partners LLC, we specialize in employee benefit plan audits, including 401(k) plans, and help businesses navigate this complex process with clarity, efficiency and peace of mind. In this article we’ll break down when 401(k) audits are required, what the process involves and how we can support you every step of the way.

When Is a 401(k) Audit Required?

A 401(k) audit is generally required for retirement plans classified as “large plans” under the Employee Retirement Income Security Act (ERISA). Whether a plan is considered “large” depends on the number of eligible participants at the beginning of the plan year, not just the number actively participating.

Here’s what you need to know:

• 100 Eligible Participants Rule: If your 401(k) plan has 100 or more eligible participants as of the first day of the plan year, you’re required to include an independent audit report when filing Form 5500.
• Eligible Participants include:
  • Active employees who are eligible to participate, whether or not they currently contribute
  • Terminated employees with remaining balances in the plan
  • Retirees and beneficiaries with plan assets

Exceptions – The 80/120 Rule:

This exception allows businesses that filed as a small plan (under 100 participants) in the previous year to delay the audit requirement until they have more than 120 participants.

Why 401(k) Audits Matter

401(k) audits aren’t just a regulatory hurdle to jump through—they’re important for:

• Protecting employee assets
• Ensuring fiduciary responsibility
• Verifying compliance with ERISA, IRS, and DOL standards
• Identifying plan errors or operational inconsistencies

A good audit helps keep your retirement plan safe, builds employee trust and minimizes the risk of costly penalties or legal issues.

What the 401(k) Audit Process Involves

The 401(k) audit process is designed to provide assurance that your plan is being administered in accordance with plan documents and regulatory requirements. Here’s an overview of the steps involved:

1. Pre-Audit Planning

We start with a thorough understanding of your plan’s structure, operations, service providers and any recent changes. Early planning allows us to set expectations, request documents and establish timelines.

2. Document Review

Our team reviews key documents such as:

• Plan documents and amendments
• Summary Plan Descriptions (SPDs)
• Form 5500
• Payroll records and contribution data
• Participant statements
• Third-party administrator reports

3. Testing and Fieldwork

We test to ensure:

• Timely remittance of employee contributions
• Proper matching contributions by the employer
• Compliance with eligibility, vesting and loan provisions
• Distributions and hardship withdrawals are processed correctly

This phase is detailed but when managed by experienced auditors like Odoni Partners it’s efficient and minimally disruptive to your operations.

4. Audit Report Preparation

After we complete our audit procedures we issue an Independent Auditor’s Report to accompany your Form 5500 filing. We also provide feedback and recommendations for improving plan administration.

5. Filing Support and Follow-Up

We ensure your final audit report and Form 5500 are filed on time and accurately. If any issues arise during the DOL review we assist with follow-up and resolution.

How Odoni Partners Makes 401(k) Audits Easy

401(k) audits can be overwhelming especially for businesses going through the process for the first time. At Odoni Partners our goal is to take the burden off your team and deliver a seamless experience. Here’s how we do it: