Your May Checklist for a Stress-Free July 31 Benefit Plan Audit
May Is When Stress‑Free Audits Are Won (or Lost)
Ask any HR or finance leader with a calendar‑year plan what July 31 means, and they won’t think “mid‑summer.” They’ll think Form 5500 filing deadline and a hard stop for getting their employee benefit plan audit finished. On paper, July 31st may sound far away. In reality, HR and finance teams only have a few short weeks to confirm whether an audit is required, clean up data, and give their auditor enough time to do careful work.
The enforcement backdrop is hard to ignore. In a recent year, the Department of Labor’s Employee Benefits Security Administration restored more than $1.4 billion to plans, and about 30% of reviewed audits of employee benefit plans had major deficiencies. On top of that, the DOL can assess civil penalties of up to roughly $2,700 per day for late or incomplete Form 5500 filings, and the IRS can add its own penalties under the Code.
For a mid‑sized Southern California employer, those numbers translate into very real risk: financial exposure, reputational damage, and a lot of avoidable stress for HR and finance.
This May‑focused employee benefit plan audit guide is designed to change that. Below, you’ll find a practical checklist you can follow week by week so your 401k plan audit or ERISA audit feels organized and predictable, not like a last‑minute scramble.
Step 1: Confirm If You Actually Need an Employee Benefit Plan Audit
Before you think about timelines or fees, you need a clear answer to one question:
Who needs an employee benefit plan audit this year?
Use the Right Headcount: Participants With Account Balances
Under current employee benefit plan audit requirements, a plan generally needs an audit when it has 100 or more participants with account balances on the first day of the plan year.
That means you should:
Look at January 1 data (for calendar‑year plans)
Count everyone with a balance: active, terminated, and part‑time employees
Exclude people who are merely eligible but have no balance
The 80–120 rule still applies:
If your beginning‑of‑year count is between 80 and 120 and you filed as a small plan last year, you can usually continue as a small plan this year.
Above 120 with balances, you’re in large‑plan territory and should expect an EBP audit.
Why This Matters for SoCal Employers
Rapid growth and lingering balances for former employees are common in mid‑sized SoCal companies. In recent reviews, about 30% of employers needed corrections tied to eligibility or participant counts.
Week 1 checklist:
Pull a beginning‑of‑year participant‑with‑balance report
Apply the 80–120 rule (small vs. large plan)
Flag terminated and part‑time employees with balances
Decide if an employee benefit plan audit is required
If yes, line up an employee benefit plan audit firm (ideally an accounting firm that specializes in employee benefit plan audits)
Getting this right in May prevents painful surprises in July.
Step 2: Clean Your Census Before the Auditor Sees It
Once you know whether a 401k plan audit or other employee benefit plan audit is required, the next priority is simple: make sure your data is right before anyone starts testing it.
Why Your Employee Census Matters
For any quality ERISA audit or employee benefits compliance audit, the participant census is the backbone. Auditors, TPAs, and recordkeepers all rely on it to:
Test eligibility and entry dates
Verify contributions and matches
Run compliance testing and prepare Form 5500
If the census doesn’t agree with payroll and your recordkeeper’s data, your employee benefit plans audit quickly turns into “data archaeology.”
Week 2 Checklist: Reconcile, Then Flag Issues
By the end of Week 2 in May, aim to:
Reconcile census and payroll data
Hire dates, termination dates, rehire dates
Birth dates, hours, compensation, ownership
Eligibility and plan entry dates
Cross‑check against your recordkeeper
Make sure everyone with an account balance appears with consistent key data
Pay attention to long‑term part‑time and terminated employees
SECURE 2.0’s long‑term part‑time rules and leftover balances can create eligibility and count issues
Create a short “exceptions” list
Rehires, transfers, missing dates, or anything that doesn’t quite match
A clean, reconciled census will make your employee benefit plan audit services feel straightforward instead of chaotic, and it gives you time to fix issues quietly in May instead of publicly in July.
Step 3: Test Contributions and Timing While There’s Time to Fix Them
With your census in good shape, the next question is whether the money moved when and how it was supposed to. This is a core focus in any 401k audit or ERISA plan audit.
Why Timing Is a Big Deal in a 401(k) Audit
Regulators look closely at how quickly employee deferrals leave payroll and reach the plan. Late deposits are one of the most common findings in audits of employee benefit plans and can trigger:
Lost‑earnings calculations
Corrective contributions
Extra disclosure and potential penalties
For small plans (under 100 participants), there’s a 7‑business‑day safe harbor for depositing deferrals. For large plans, the standard is still “as soon as reasonably possible”—not the old “15th business day” myth.
Make Sure “Compensation” Means the Same Thing Everywhere
One of the most common problems we see in an employee benefit plan audit isn’t exotic at all. It’s the quiet mismatch between the plan document's definition of compensation and what payroll actually uses to calculate deferrals and employer contributions.
That gap often appears when:
New pay codes are added (bonuses, different overtime codes, commissions, allowances)
You change payroll providers or HRIS systems
Your plan is amended, but payroll settings aren’t updated to match
In practice, that can mean certain types of pay are incorrectly included or excluded when calculating 401(k) deferrals, match, or profit‑sharing contributions. Over time, those small differences add up—and they’re exactly the kind of issue an auditor or regulator will notice.
As part of your May checklist, take an hour with your payroll lead and your plan document:
Compare the plan’s “compensation” definition (and any special definitions for match or profit‑sharing) to the earnings codes in your payroll system
Confirm which codes are included or excluded for each plan formula
Document any decisions or corrections you make
Catching this now, before your 401k plan audit or ERISA audit digs into the details, can save a lot of rework, corrections, and difficult conversations later.
Week 3 Checklist: Money & Rules Must Match
By the end of Week 3 in May, aim to:
Pull a pay‑by‑pay remittance report
Pay date, withholding date, deposit date, and settlement date
Review deferral timing
Look for deposits that lag well beyond what’s reasonably possible
Verify employer contributions against the plan document
Match formulas, true‑ups, profit‑sharing, and forfeiture usage
Flag any late or unusual items for follow‑up
Bring these to your Form 5500 audit CPA or San Diego 401k auditor early
Catching timing or contribution issues in May gives you room to correct them and discuss options with your auditor, before they slow down your employee benefit plan audit or drive up your benefit plan audit cost in July.
Step 4: Build Your Audit Package and Assign Owners
Once you’ve confirmed the audit requirement, cleaned your census, and tested contributions, it’s time to pull everything together and make sure nothing falls through the cracks.
What Belongs in Your Audit-Ready Package
By the end of May, aim to have your core employee benefit plan audit checklist items in one secure place:
Plan document, adoption agreement, and all amendments
Summary plan description (SPD) and key participant notices
Year‑end trust or custodial statements
Compliance testing and allocation reports from your recordkeeper/TPA
Loan and distribution support (approvals, calculations, documentation)
Prior‑year Form 5500 and audit report, if applicable
Storing these in a shared, access‑controlled folder or portal makes it easier for your employee benefit plan audit firm to work efficiently.
Who Owns What: HR, Payroll, Recordkeeper, Auditor
To keep your employee benefit plans audit moving:
HR/Benefits: Plan documents, eligibility, census completeness, vendor coordination
Payroll/Finance: Compensation data, contribution calculations, deposit timing
Recordkeeper/TPA: Trust reports, testing, draft Form 5500 package
Auditor: Risk assessment, testing, financial statements, audit opinion
A short weekly check‑in (15–20 minutes) with all parties and a simple tracking sheet can prevent last‑minute scrambles and keep your EBP audit on schedule.
Step 5: Are You On Track—or Already in the Danger Zone?
A simple red‑yellow‑green check in late May or early June can tell you whether your employee benefit plan audit is headed for a calm finish or a July scramble.
Green: You’re in Good Shape
You’re likely in “green” territory if:
You’ve confirmed whether an audit is required (using participant‑with‑balance counts and the 80–120 rule).
Your census is reconciled to payroll and the recordkeeper.
Contribution timing has been reviewed and any issues are identified.
Core documents are assembled and your Form 5500 audit CPA is already testing.
Yellow: Still Manageable, But Don’t Wait
You’re in “yellow” if:
The auditor is engaged, but census or contribution testing isn’t done.
You have open questions about terminated employees with outstanding balances or eligibility issues.
Draft Form 5500 filing is delayed because inputs are missing.
Red: Time for a Serious Conversation
“Red” looks like this:
You still haven’t confirmed who needs an employee benefit plan audit.
No auditor is engaged by late May.
Census data and documents are scattered.
Late contributions or eligibility errors are surfacing for the first time in June or July.
At “red,” talk with an accounting firm that specializes in employee benefit plan audits about whether to use an extension rather than risk a late, incomplete filing and escalating penalties.
Why Starting in May Protects Your Plan—and Your Team
When you spread the work across May and June, your employee benefit plan audit becomes a structured project rather than a July emergency. You give yourself time to:
Confirm whether an audit is truly required
Fix census and contribution issues quietly
Keep your Form 5500 filing accurate and on time
Protect HR and finance from last‑minute fire drills
Waiting until late June compresses everything: data cleanup, testing, questions for your employee benefit plan audit firm, and internal approvals, into a few stressful weeks. That’s when mistakes, penalties, and burnout show up.
Early clarity beats late heroics every time.
Make Your Next Benefit Plan Audit the Calmest One Yet
If you sponsor a 401(k) or 403(b) plan in Southern California and you’re close to or over the 100‑participant threshold, you don’t have to navigate this alone.
Geri offers calm, hands‑on employee benefit plan audit services as San Diego’s ERISA plan audit and audit‑readiness specialist. That includes:
Early scoping calls in May to confirm your status and timeline
Plain‑language explanations of what auditors and regulators expect
Help coordinating HR, payroll, and your recordkeeper so everyone knows their role
Practical guidance on managing benefit plan audit cost while still meeting quality standards
Schedule a Consultation with Geri
If you’re looking at July 31 and wondering whether you’re on track, now is the time to talk.
Schedule a brief consultation to:
Confirm whether you need an audit
Get an honest read on whether you’re green, yellow, or red
Map out a realistic plan for the next 4–8 weeks
You’ll walk away with clarity, next steps, and a partner who’s focused on keeping your employee benefit plans audit calm, compliant, and under control.