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How to Choose an Employee Benefit Plan Auditor
This article highlights key considerations from LBMC’s fiduciary decision guide. For the full auditor evaluation framework, download the complete guide.
Choosing an employee benefit plan auditor is not a routine vendor decision. For plan sponsors, it is a fiduciary decision that can affect regulatory exposure, Form 5500 filing readiness, audit quality, internal controls, and the long-term integrity of the plan.
Many plans are required to attach audited financial statements to Form 5500 once they meet large-plan filing requirements. But the real issue is not only whether the audit gets completed. It is whether the audit is performed by a firm with the specialization, volume, technical knowledge, and process discipline required for employee benefit plan audits.
LBMC created this guide to help plan sponsors evaluate employee benefit plan audit firms more intelligently and understand what separates a high-quality audit from a risky, low-value engagement.
Why auditor selection is a fiduciary decision
Selecting an employee benefit plan auditor carries more risk than many plan sponsors realize. Under ERISA, fiduciaries are responsible for acting prudently when selecting and monitoring service providers. That includes the plan auditor.
The uploaded LBMC guide states this directly: selecting an employee benefit plan auditor is not a routine vendor decision; it is a fiduciary act under ERISA. The guide also notes that many retirement plans must obtain an independent audit and attach audited financial statements to Form 5500.
A deficient audit can create problems that extend beyond inconvenience. Potential consequences can include rejected Form 5500 filings, DOL correspondence, re-audit costs, civil penalties, expanded document requests, increased regulatory scrutiny, and personal fiduciary exposure.
Audit quality is not uniform. Specialization matters.
When is an employee benefit plan audit required?
In general, federal law requires an employee benefit plan audit when a plan has more than 100 participants with account balances on the first day of the plan year. Some plans may qualify for continued small-plan filing under the 80–120 participant rule, but once a plan qualifies as a large plan, an independent audit is generally required.
For calendar-year plans, audited financial statements are typically filed with Form 5500 by July 31, with an available extension to October 15.
Participant counts often increase gradually. Many plan sponsors do not realize they have crossed the audit threshold until filing deadlines are approaching.
What distinguishes a high-quality employee benefit plan audit?
A quality employee benefit plan audit does more than issue an opinion. It helps plan sponsors address both financial reporting risk and compliance risk.
A strong EBP auditor should understand how plan activity connects to Form 5500 reporting, Schedule H, financial statement disclosures, ERISA Section 103(a)(3)(C) certifications, investment reporting, participant loans, required disclosures, and plan operations. The LBMC guide emphasizes that technical depth helps reduce filing risk.
A high-quality audit should also assess whether the plan is operating according to current plan documents, amendments, summary plan descriptions, eligibility provisions, compensation definitions, contribution limits, and timely deposit requirements. Late participant deferrals remain a heavily scrutinized area because delayed deposits may be treated as prohibited transactions requiring correction.
Questions to ask before choosing an EBP audit firm
Not all CPA firms have deep employee benefit plan audit experience. Before selecting or renewing an auditor, plan sponsors should evaluate whether the firm has the right specialization, oversight, regulatory knowledge, communication process, and data protection controls.
Use a shortened version of the PDF’s framework:
Audit volume and specialization
Ask whether the firm has a dedicated employee benefit plan audit team and how many employee benefit plan audits it performs annually.
Professional oversight
Ask whether the firm participates in the AICPA Employee Benefit Plan Audit Quality Center and whether its employee benefit plan audit practice is subject to peer review.
Regulatory knowledge
Ask how the firm stays current with SECURE 2.0 requirements, ERISA Section 103(a)(3)(C) audits, late deferral corrections, and Schedule H reporting.
Cybersecurity and data protection
Plan audits require access to sensitive payroll, participant, and census information. Ask how the firm protects personally identifiable information, manages permissions, and handles sensitive data.
Communication and risk advisory
Ask whether the firm provides written communication around operational findings, internal control recommendations, and plan improvement opportunities.
This is only a starting point. The full LBMC guide includes a more detailed framework plan sponsors can use when comparing audit firms or presenting a recommendation to a fiduciary committee.
When should you reevaluate your current employee benefit plan auditor?
Even long-standing audit relationships should be periodically reviewed. A familiar auditor is not always the right auditor, especially if the plan has grown, regulations have changed, service quality has declined, or the audit process has become too transactional.
Plan sponsors should consider reevaluating their current auditor if:
- The firm performs a low volume of employee benefit plan audits.
- Junior staff lead meetings with limited senior oversight.
- The audit is completed with little planning discussion.
- Management letters rarely identify improvement opportunities.
- Regulatory changes are not proactively addressed.
- The sponsor is unsure about the firm’s peer review or inspection history.
The LBMC guide specifically notes that fiduciary prudence includes periodic evaluation of service providers and that uncertainty may warrant a comparison discussion.
How fiduciary committees should discuss auditor selection
When auditor selection is presented to a board or fiduciary committee, the conversation should not focus only on fee comparison. A stronger discussion should address regulatory risk, audit quality, firm specialization, governance oversight, cybersecurity controls, and the potential cost of a deficient audit.
The uploaded guide recommends framing the discussion around risk management, including DOL deficiency concerns, rejected filing consequences, audit volume benchmarking, EBPAQC membership, peer review, cybersecurity controls, and the financial and reputational impact of a re-audit.
Why plan sponsors choose LBMC for employee benefit plan audits
LBMC specializes in employee benefit plan audits, including defined contribution plans, 401(k) plans, SEC Form 11-K filings, 403(b) plans, profit sharing plans, defined benefit plans, pension plans, money purchase pension plans, health and welfare plans, ESOPs, and Form 5500 preparation.
The guide positions LBMC as one of the largest employee benefit plan auditors in the United States and notes that LBMC applies experienced audit professionals, ongoing technical training, and an audit approach tailored to each client’s plan characteristics.
Download the full guide: Choosing the Right Employee Benefit Plan Auditor
This page provides a high-level overview of the factors plan sponsors should consider when selecting or reevaluating an employee benefit plan auditor. For the full fiduciary decision framework, download LBMC’s guide: Choosing the Right Employee Benefit Plan Auditor: A Fiduciary Decision Guide for Plan Sponsors.
The full guide includes a deeper framework for evaluating audit quality, comparing audit firms, preparing committee discussions, reviewing audit readiness, and identifying when an existing auditor relationship should be reassessed.
Get the full guide to help your team evaluate employee benefit plan audit firms, prepare for fiduciary committee discussions, and identify the audit quality factors that matter most.
Is choosing an employee benefit plan auditor a fiduciary decision?
Yes. Selecting an employee benefit plan auditor is part of a plan sponsor’s fiduciary responsibility under ERISA. Plan fiduciaries should evaluate whether the audit firm has the specialization, technical knowledge, quality controls, and process discipline needed to perform employee benefit plan audits effectively.
When should a plan sponsor reevaluate its current auditor?
A plan sponsor should consider reevaluating its auditor if the firm performs few employee benefit plan audits, provides limited senior involvement, rarely identifies improvement opportunities, does not proactively address regulatory changes, or cannot clearly explain its peer review or inspection history.
Why does employee benefit plan audit specialization matter?
Employee benefit plan audits involve specialized reporting, compliance, data, and regulatory issues. A firm that performs a higher volume of plan audits is more likely to understand common risk areas, documentation challenges, Form 5500 reporting issues, and plan sponsor concerns.
Explore Employee Benefit Plan Audit Resources
Access LBMC’s guides, whitepapers, and checklists for plan sponsors preparing for employee benefit plan audits, Form 5500 filing, 401(k) compliance, auditor selection, and audit readiness.