The purpose of an audit for a retirement plan that requires one (generally, those with 100 or more participants) is to ensure that the assets are where the plan sponsors and providers say there are, as well as to ensure that the assets will be there to pay off the participant’s retirement benefits. So auditors are concerned about a plan sponsor’s internal controls as well as any issues that threaten the tax qualification of the retirement plan.
Most auditors were never interested in plan expenses of the plans they reviewed because quite honestly, up until a few years ago, no one else did either. It used to drive a lot of retirement plan professionals crazy that auditors didn’t question plan fees (count me as one), but auditors contended that expenses were irrelevant to the purpose of their audit.
Well, things have changed and plan sponsors with audits have more work to do.
One of my RIA clients (cheap plug here) forwarded me a list of questions that one of their audit-required plan sponsor clients forwarded from their auditors. It was a litany of questions regarding 408(b)(2) fee disclosures; plan expenses, and whether the plan sponsor exercised their fiduciary duty in determining whether plan expenses are reasonable for the services provided.
So if a plan sponsor did nothing about plan expenses and truthfully told their auditor of their malfeasance of fiduciary duty, I am sure that those responses will end up somehow in the audit report, which of course is filed with a Form 5500 that is readily available to the government and to the public.
So plan sponsors with an audit have some work to do to show their auditors on whether they are exercising their fiduciary duty in only paying reasonable plan expenses.
Again, I didn’t make the fiduciary threat up; it’s already there.