Q & A: Helping Transportation Companies Navigate an Employee Retirement Plan Audit

Jul 24, 2018Audit & Assurance, Transportation

Does your transportation company’s retirement plan require an audit? An audit is required under federal law to ensure the plan functions, operations and processes are in compliance with established regulations. To help transportation companies streamline their employee retirement plan audit process, we have provided a Q&A summary below to help companies prepare for their employee retirement plan audit.


A: According to the Department of Labor, if the number of qualified employees has changed in the last year, the rules governing the employee Retirement plan may require changes, too. An employee Retirement plan audit is generally required if your transportation company has more than 100 eligible participants on the first day of the plan year. 

The plans that may require an audit include:

  • Profit sharing plans
  • Defined contribution plans
  • Defined Retirement plans


A: Large plans must complete Schedule H with the Form 5500 Annual Report and are required to have an audit. Small plans must complete Schedule I with the Form 5500 and are not required to have an audit.

There is an exception to this called the 80-120 Rule. This rule allows a plan with between 80 and 120 participants to be classified the same way it was classified in the prior year. For example, if a plan had 95 participants at the beginning of 2017, it would have been considered a small plan for 2017. If at the beginning of 2018, the same plan had 110 participants, the plan could elect to still be considered a small plan.

The participant count used to make these determinations includes all employees who are eligible to participate in the plan, regardless of participation. It also includes all participants who have separated employment, but still have a balance within the plan.

Your plan’s third party administrator (TPA) should inform you when an audit is required.  However, if you believe you are close to being considered a large plan, you should review your plan activity and contact your TPA sooner rather than later.


A: Once it has been determined that your transportation company needs an audit, the first step is to select an independent CPA firm to perform the audit. It is important to select a firm with the necessary skills and retirement plan experience to provide the services your plan needs.

It may seem like an easy solution to use the CPA firm you use for your corporate accounting needs. However, that firm may not have the required skill or expertise to audit your retirement plan effectively and efficiently.  It is worth the extra effort to find a firm that will provide the results your plan needs.


A: The purpose of a retirement plan audit is to test financial information and compliance with plan documents and regulations. During the audit, your auditors will review your plan’s records and transactions, and may ask for additional documentation to support any of the transactions. Some of the areas tested during the audit include:

  • Contributions – employee and employer, if applicable
  • Participant data and accounts
  • Distributions
  • Loans, if applicable

One of the focal areas of any retirement plan audit is the review of personnel files. Before your audit, you should ensure these files are complete and accurate, including hire and termination dates, pay rates, loan and withdrawal support, and any other important Retirement elections. Files should also be clean, organized and consistent in order to ensure documentation is maintained to be in compliance with the plan document and that all participants are treated consistently.

Before your first audit, be sure to gather and read your plan documents and determine if your plan is following all the various provisions. If something is unclear, inquire of your TPA or other plan service provider.


A: After the audit has been completed, your auditor will issue three documents related to the audit:

  • A report expressing an opinion as to whether the financial statements fairly present the net assets of the plan.
  • A letter commonly referred to as a “management letter.” This letter is an overall summary of the audit and discusses your plan’s accounting policies, any difficulties encountered in performing the audit, any disagreements with management, and any other audit findings or issues that need to be brought to management’s attention.
  • A letter commonly referred to as an “internal control letter.” This letter is meant to identify and communicate areas of operations or procedures where your plan can strengthen or redesign internal controls.

If you would like more information or if you are seeking an experienced team that specializes in employee Retirement plan audits, Smith Schafer wants to help! Our firm has committed a substantial component of our staff to retirement plan audit services. Smith Schafer has provided audit, consulting, third party administrative and internal audit services for transportation company retirement plans since 1971. We can take a second look at your current plan and fees at any time.


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