Employee benefit plan audits aren’t something HR teams think about every day, but when you do need one, the learning curve can feel steep. Whether you manage a 401(k), health and welfare plan, or another ERISA-governed offering, you’re responsible for ensuring plan integrity, data accuracy, and compliance. That’s where an employee benefit plan audit (often called an EBP audit) comes in.

This guide breaks down the purpose, requirements, and timeline of an EBP audit in plain language. It’s designed for HR managers, benefits administrators, and plan sponsors who want a practical overview without the jargon. 

We’re not trying to turn you into an auditor. But we do want you to understand what triggers an audit, what auditors look for, and how to prepare your team so the process is smoother and less stressful.

And because Selerix supports thousands of employers with enrollment, data accuracy, and compliance workflows, we’ll also highlight where better systems and communication can reduce audit-related headaches long before an auditor even arrives.

Do You Need an Employee Benefit Plan Audit?

One of the biggest questions employers ask is simple: Do we really need an audit?

The answer may surprise some smaller employers. Under ERISA, most employee benefit plans with 100 or more eligible participants at the start of the plan year are required to undergo an annual audit. This threshold applies to retirement plans and many health and welfare plans, though the rules differ slightly based on plan type and participation and how you support employee lifecycles.

A few essentials to keep in mind:

• “Eligible participants” includes more people than many teams expect. It’s not just the employees who enroll. It also includes those eligible but not enrolled, terminated employees with account balances, and sometimes participants who have not yet contributed.
  
• Crossing the 100-participant threshold can be sudden. Employers often discover they need an audit only when preparing for their Form 5500 filing.
  
• Plans that fluctuate between sizes may qualify for the 80–120 rule. If your plan had between 80 and 120 participants at the beginning of the year, you may be allowed to follow the “status quo” and file in the same category (small or large plan) as the previous year.

If your organization crosses the audit threshold unexpectedly, you’re not alone — it happens often, especially after periods of growth or changes in plan eligibility. Knowing the triggers early gives you time to prepare, organize data, and avoid the last-minute scramble that leads to costly delays.

What Does an EBP Audit Include?

An employee benefit plan audit examines whether your plan is being operated according to its written terms and ERISA requirements. While every audit is slightly different, most follow a predictable structure.

Here’s what auditors typically review:

1. Financial statements

Auditors examine contributions, distributions, investment balances, and any fees or administrative expenses to ensure they’re complete and fairly stated.

2. Internal controls

They evaluate how your team tracks eligibility, processes payroll, remits contributions, communicates plan changes, and secures participant data.

3. Operational compliance

Auditors verify that:

• eligibility rules in your plan document match what’s happening in practice
• contributions are made on time
• loan provisions, hardship withdrawals, and distributions follow plan rules
• required notices and disclosures are consistently provided

4. Participant data accuracy

This is where most issues occur. Auditors check:

• demographic information
• hire and termination dates
• compensation definitions
• contribution calculations
• hours worked (for eligibility and vesting)

Small gaps in data often create the biggest delays. That’s why many HR teams lean on comprehensive benefits administration systems (like Selerix) to help them reduce errors at the source.

5. Form 5500 support

Your audit results feed into the Form 5500 filing. Missing or inconsistent data can hold up the filing and create compliance risk, which is why audit prep and 5500 prep often go hand in hand.

EBP audits are detailed, but they’re not meant to be adversarial. They exist to protect both participants and plan sponsors and to ensure plans operate fairly and accurately.

Common Mistakes That Trigger Red Flags

Most employee benefit audits don’t “fail” because an employer has bad intentions. They go sideways because of preventable errors in data, timing, or process. When auditors talk about what slows them down, a few patterns show up again and again.

Here are some of the most common issues that trigger questions or corrections when you audit an employee benefit plan:

1. Contribution errors

Late, missing, or miscalculated contributions are a major focus in employee benefit audits. Common problems include:

• Deferrals not being taken correctly from payroll
• Employer matches calculated on the wrong compensation definition
• Contributions not remitted to the plan trust as soon as administratively possible

Even small timing gaps can be viewed as a prohibited loan from the plan to the employer, which is why accurate and timely payroll integration is so important.

2. Inaccurate census data

Auditors rely on your census data to test eligibility, vesting, and contributions. If employee hire dates, termination dates, birthdates, or pay are incorrect or inconsistent across systems, it creates more testing, more questions, and more risk for findings.

3. Misinterpreting plan terms

It’s easy for “how we do it in practice” to drift away from what the plan document actually says. Over time, HR teams may apply eligibility, entry dates, or match formulas in ways that are convenient operationally but not aligned to the legal document.

Auditors will compare real-world processes to your plan terms. If they don’t match, you may be required to correct past transactions and tighten procedures going forward.

4. Poor documentation

If it’s not documented, it’s very hard to defend in an audit. Gaps often show up in:

• Missing approvals or support for distributions and loans
• Incomplete documentation for hardship withdrawals
• Lack of evidence for when and how required notices were sent

5. Late or incomplete Form 5500 filings

Because your audited financial statements support the Form 5500, delays in the audit can cascade into late filings. That’s where penalties can add up quickly.

The good news is that most of these issues can be mitigated with better dataflows, clear admin workflows, and centralized records. That’s where a benefits administration platform that enforces rules and captures documentation can make a real difference. 

Your EBP Audit Checklist: What to Prepare

Once you know an audit is required, preparation is half the battle. A simple employee benefit plan audit checklist can help you gather what auditors will need and minimize back-and-forth questions.

Here are the core categories to focus on:

Plan and governance documents

• Current plan document and all amendments
• Summary Plan Description (SPD) and any Summary of Material Modifications (SMMs)
• Trust agreement and service provider contracts
• Committee charters and governance policies, if applicable
• Plan committee meeting minutes

Participant and payroll data

• Full census file for the plan year (including all eligible employees, not just participants)
• Employee hire, rehire, and termination dates
• Compensation data used for contribution calculations
• Records of eligibility determinations and entry dates

If you use a system like Selerix to drive eligibility and enrollment, many of these data points already live in our Smart Reports, which makes export and review far easier.

Transaction and activity support

• Payroll contribution files and proof of remittance to the plan
• Distribution, rollover, loan, and hardship withdrawal documentation
• Support for employer contributions or matches
• Reconciliation of plan assets and account balances

Compliance and communication

• Copies of notices and disclosures (e.g., safe harbor, automatic enrollment, fee disclosures)
• Evidence of how and when notices were delivered
• Prior Form 5500 filings and, if required, prior-year audit reports

System and process information

• Descriptions of how data flows between HR, payroll, and recordkeeping systems
• Descriptions of key controls, such as contribution reconciliations and eligibility checks

Creating a repeatable audit prep checklist and tying it to your benefits calendar makes each year’s EBP audit more predictable and less disruptive. 

Sidebar: How Brokers Can Help Employers Get Audit-Ready

A strong broker relationship can make the difference between a smooth employee benefit plan audit and a stressful one. Because brokers sit at the intersection of carriers, administrators, and employer strategy, they’re uniquely positioned to help clients tighten processes long before an audit finds a problem.

Here are ways brokers can support audit readiness throughout the year:

1. Clarify plan interpretation and document alignment

Brokers can help employers understand the practical implications of their plan document — especially when eligibility rules, employer match formulas, or waiting periods change. Keeping plan terms aligned with real-world workflows reduces the risk of operational drift.

2. Coordinate with carriers and vendors

Missing confirmations, slow file feeds, and mismatched data slow down audits. Brokers can keep carriers, enrollment partners, and admin platforms in sync, ensuring files are accurate and delivered on time when clients need them.

3. Recommend systems that reduce risk

Brokers often identify gaps in data accuracy, communication, or ACA/COBRA workflows. Recommending platforms like Selerix, which centralize enrollments, communications, and eligibility rules, helps clients maintain cleaner records year-round and reduce audit friction.

4. Facilitate a pre-audit review

Many brokers conduct mini “checkups” before the plan year closes, reviewing contributions, eligibility determinations, and documentation to catch errors early. This proactive step often prevents costly corrections.

5. Support notice and disclosure compliance

From plan changes to ACA and COBRA notices, brokers can help clients stay organized with templates, timelines, and delivery methods that create a clear audit trail.

6. Guide clients through findings

If an audit uncovers corrections or process gaps, brokers can help employers resolve them efficiently — coordinating with carriers, payroll, and administrators to implement fixes and prevent recurrence. 

Who Performs the Audit? Choosing an Auditor

Not all CPAs or accounting teams are equipped to be employee benefit plan auditors. Because EBP audits have unique requirements under ERISA and DOL rules, you’ll want an auditor with specific experience in this space.

When evaluating employee benefit plan auditors, consider:

• Experience with your plan type and size
  Ask how many benefit plan audits they complete each year and which types (401(k), pension, health and welfare, etc.).
  
• Membership in specialized practice centers
  Many firms participate in AICPA quality programs for benefit plan audits and follow specific practice guidelines.
  
• Knowledge of current ERISA and DOL guidance
  Rules evolve, and your auditor should be proactive about new requirements and best practices.
  
• Communication style and responsiveness
  You’re looking for a partner. An ideal employee benefit plan auditor explains issues clearly, gives you time to correct items, and collaborates with your HR, payroll, and benefits vendors.

Your broker, recordkeeper, or benefits administration provider can often recommend reputable audit firms they’ve successfully partnered with in the past. 

How to Make Your Next EBP Audit Less Painful

You can’t make an audit disappear, but you can make it far less stressful to manage employee benefits in a compliant way. A smoother experience usually comes down to three themes: clean data, clear workflows, and strong documentation.

Here are a few practical moves that help:

• Tighten data at the source.
  Integrate HR, payroll, and benefits systems so that eligibility, hours, and compensation are consistent. Tools like Selerix BenSelect help ensure that enrollments and changes flow correctly, which reduces manual rekeying and data mismatches later.
  
• Standardize your processes.
  Document how your team handles eligibility, contribution changes, leaves of absence, qualifying life events, and terminations. Consistency matters in an employee benefits audit, and written procedures give you something concrete to show an auditor.
  
• Use technology to enforce rules.
  Automated eligibility rules, contribution limits, and effective dates reduce the risk of misapplied plan terms. That is especially important for complex rules tied to hours of service or multiple employee classes.
  
• Centralize communications and notices.
  With a communications platform (such as Selerix Engage), you can track which messages were sent, to whom, and when. That audit trail is invaluable when questions arise about disclosures, ACA notices, or COBRA timing, and it also helps address the clarity gaps many employees report around compliance programs.
  
• Run a “mini-audit” with your providers.
  Consider a pre-audit review with your recordkeeper, broker, or benefits admin partner. Many can help you identify common errors and clean them up before your auditor starts testing in detail.

The result is not only an easier audit, but also a more reliable day-to-day benefits experience for employees. 

Compliance Starts With Good Data

At the end of the day, an employee benefit plan audit is really a test of how well your plan is being run. The smoother your data, workflows, and documentation, the more confident you can feel when it’s time to audit an employee benefit plan.

For HR and benefits teams, that means:

• knowing when an EBP audit is required
• understanding what auditors will expect
• putting tools and processes in place that keep data clean all year, not just at year-end

That’s where partners like Selerix come in. With more than 14M employees enrolled, our platform is designed to help employers and brokers streamline enrollment, centralize participant data, support ACA and COBRA processes, and create clear communication across the full benefits lifecycle.

The better your data and workflows, the easier your next benefit plan audit will be — and the more time you’ll have to focus on strategy instead of scrambling for files.

If you’re looking to reduce audit stress, improve data accuracy, and strengthen your benefits experience overall, it may be time to revisit your benefits administration stack. An integrated solution can’t replace your employee benefit plan auditor, but it can make their job (and yours) much easier.

Ready to reduce audit risk and shore up your benefits data? 

Talk with a Selerix expert about how our platform supports enrollment, communication, and compliance, and see what a cleaner audit year can look like for your team.