For many employers, becoming subject to an annual ERISA audit is simply a byproduct of growth. The company hires more employees, the retirement plan grows alongside the business, and eventually the plan crosses the threshold requiring an independent audit.

While that milestone is common, many plan sponsors are unsure what changes once the audit requirement begins.

The audit itself is only part of the picture. In addition to engaging an independent accounting firm, employers should expect additional document requests, more coordination among their payroll provider, recordkeeper, TPA, and CPA, and a longer Form 5500 preparation process. For organizations that maintain organized records throughout the year, the process is generally straightforward. For those that don’t, the first audit often exposes gaps that have existed for years but simply haven’t been discovered.

Perhaps more importantly, the transition to audit status causes many employers to take a closer look at their fiduciary responsibilities. The audit does not create new fiduciary obligations, but it often shines a brighter light on whether existing responsibilities are being carried out consistently. Questions surrounding payroll deposits, participant transactions, plan governance, service provider oversight, and required notices become much more meaningful when viewed through the lens of an annual audit.

Fortunately, employers have more options than they often realize. Some decide to remain with a standalone plan while outsourcing significant administrative responsibilities through a 3(16) Fiduciary. Others conclude that a Pooled Employer Plan (PEP) is a better fit for their organization. Neither approach is inherently right or wrong. The appropriate answer depends on the employer’s goals, desired flexibility, and appetite for administrative responsibility.

An annual audit should not simply be viewed as another compliance requirement. It can also serve as an opportunity to evaluate whether the retirement plan’s structure, governance, and service providers continue to fit the organization’s needs as it grows.

To help clients navigate that process, we’ve prepared a detailed memorandum discussing the audit rules, fiduciary considerations, expected costs, PEPs, 3(16) fiduciary services, and practical next steps.