April 3, 2026
An employee benefit plan audit is an independent examination of a company's retirement plan (401(k), pension, profit-sharing) or welfare plan (health insurance, life insurance) to verify that the plan's financial statements are accurate, contributions are handled correctly, and the plan complies with ERISA and DOL regulations. Plans with 100 or more participants are required to file an audited financial statement as part of their annual Form 5500.
If your company sponsors a 401(k), pension, or health plan with 100+ participants, you need an annual audit by an independent CPA firm. The audit examines whether participant contributions are deposited on time, investment earnings are reported correctly, distributions are calculated properly, and the plan's financial statements fairly represent its financial position. The results are filed with the Department of Labor as part of the Form 5500.
For CPA firms performing these audits, the document processing burden is enormous. A single EBP audit involves broker statements, holdings reports, participant records, trust statements, and payroll data, often totaling thousands of pages across dozens of formats. For how firms handle this document volume, see how CPA firms process thousands of document formats.
Contributions: Are employer and employee contributions deposited within the DOL's required timeframe (generally the 15th business day of the month following the payroll date)? Late deposits are one of the most common audit findings.
Investment holdings: Do the plan's reported holdings match the custodian's broker statements? This requires extracting position data from broker statements (which come in dozens of formats across custodians like Schwab, Fidelity, Vanguard, and smaller firms) and reconciling against the plan's records.
Participant data: Are eligibility, vesting, and benefit calculations correct based on the plan document and participant records?
Distributions: Were distributions (hardship withdrawals, loans, termination payouts) calculated correctly and processed according to the plan document?
Form 5500 accuracy: Does the Form 5500 filing accurately reflect the plan's financial position, participant counts, and compliance status?
EBP audits are document-intensive. A mid-sized firm auditing 50 plans might process 200,000+ pages annually across broker statements, trust reports, payroll records, and plan documents. Each custodian formats their holdings reports differently. The same firm might receive reports from Schwab, Fidelity, Empower, TIAA, and a dozen smaller custodians, each with a unique layout.
Historically, auditors extract this data manually or use template-based tools that require separate configuration for each custodian format. When a custodian changes their report layout (which happens regularly), templates break.
AI-powered extraction tools like Lido handle this differently: they read any broker statement format on first upload without per-custodian templates. BDO, a Top 5 accounting firm, processes 42,000 pages annually through Lido for holdings report extraction across their employee benefit plan audit practice, after evaluating DataSnipper and finding it insufficient for broker statement conversion.
Required: Any ERISA-covered benefit plan with 100 or more eligible participants at the beginning of the plan year must file an audited financial statement with the Form 5500. This includes 401(k) plans, defined benefit pension plans, profit-sharing plans, and welfare benefit plans (health, dental, life insurance).
Exempt: Plans with fewer than 100 participants ("small plans") file the Form 5500-SF and are generally exempt from the audit requirement, though some exceptions apply.
The 80-120 rule: Plans that had between 80-120 participants can file as a small plan if they filed as small the previous year, avoiding the audit requirement even if they temporarily exceed 100 participants.
For the tools CPA firms use in EBP audits, see best audit software for CPA firms, best OCR for audit teams, and best financial document automation software. For the extraction layer specifically, see best payroll data extraction software.
Try Lido for EBP audit evidence extraction → For 401(k)-specific requirements, costs, and preparation checklist, see 401(k) audit requirements. For the broader ERISA framework that governs these audits, see what is an ERISA audit. For Form 5500 filing details and deadlines, see Form 5500 audit requirements.
An employee benefit plan audit is an independent examination of a company's retirement or welfare plan by a CPA firm. It verifies that the plan's financial statements are accurate, contributions are deposited on time, and the plan complies with ERISA and DOL regulations. Required for plans with 100+ participants as part of the annual Form 5500 filing.
Any ERISA-covered benefit plan with 100 or more eligible participants at the beginning of the plan year. This includes 401(k) plans, pension plans, profit-sharing plans, and welfare plans (health, dental, life insurance). Small plans with fewer than 100 participants are generally exempt.
EBP audit fees typically range from $5,000 to $30,000+ depending on plan size, complexity, and the CPA firm. A straightforward 401(k) with 200 participants might cost $8,000-12,000. Plans with complex investments (real estate, private equity) or multiple plan types cost more. First-year audits are more expensive due to initial setup.
Key documents include: the plan document and any amendments, trust or custodial agreements, broker/custodian statements for all investment holdings, participant census data, payroll records showing contributions, distribution records, Form 5500 and schedules, loan documentation, and the plan's financial statements. Most of these arrive as PDFs requiring data extraction.
Late remittance of participant contributions is the most common finding. The DOL requires contributions to be deposited as soon as administratively feasible, generally within 15 business days of payroll. Other common findings include incorrect eligibility determinations, plan document compliance issues, and missing participant data.
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