Employee Benefit Plan Audits

Where Compliance Ends and Risk Begins

Employee Benefit Plans (EBPs) are a critical component of an organization’s overall compensation and employee welfare strategy. These plans including 401(k), pension, health, and other retirement or welfare benefit arrangements are designed to support employees’ financial security and well-being. In the United States, thousands of EBPs collectively manage trillions of dollars in assets, making them a significant part of the financial ecosystem. EBPs operate at a unique intersection of regulation, fiduciary responsibility, and financial reporting.
They are not typical entities. They don’t exist to generate profit. They exist to protect employee wealth.
And yet, many organizations approach EBP audits like any other statutory requirement.
That’s the first mistake.
EBPs Are Different. The Audit Should Be Too.
Unlike traditional financial reporting:
  • Ownership doesn’t sit with shareholders, it sits with participants
  • Decision-making is driven by fiduciary responsibility
  • Operations rely heavily on third-party service providers
  • Compliance is governed by ERISA, DOL, and IRS regulations

This creates an environment where: Accountability remains internal, but execution is largely external.
And that’s where audit complexity begins.
The Real Challenge Isn’t Visibility: It’s Control
Most EBPs operate through a network of:
  • Recordkeepers
  • Custodians
  • Trustees
  • Third-party administrators
While these improve efficiency, they also fragment control.
Plan sponsors often rely on:
  • Reports they didn’t generate
  • Controls they don’t own
  • Systems they don’t fully oversee

So, the key question becomes: Is the audit truly testing the plan or just validating the ecosystem around it?
Where Things Typically Go Wrong
In practice, EBP audits focus on output rather than underlying risks leading to recurring blind spots:
  • Participant data errors flowing from payroll to plan records
  • Delays or inaccuracies in contribution remittances
  • Over-reliance on SOC 1 reports without contextual evaluation
  • Superficial validation of investment balances
  • Limited challenge over benefit payments and distributions

Individually, these may seem operational.
Collectively, they can lead to:
  • Compliance exceptions
  • Reporting inaccuracies
  • Fiduciary exposure
Regulation Doesn’t Forgive Operational Gaps
Under ERISA and DOL oversight:
  • Late contributions can trigger prohibited transactions
  • Data inconsistencies can impact participant allocations
  • Errors in distributions can lead to compliance breaches
  • Weak oversight of service providers can result in control failures
And importantly “Responsibility doesn’t shift with outsourcing. It stays with the plan sponsor.”
Why a Standard Audit Approach Doesn’t Work
Many audits still rely on:
  • Checklist-based procedures
  • Heavy dependence on service organization controls
  • Year-end validation instead of continuous risk assessment
  • Limited interaction with plan operations

This creates a disconnect: The audit is technically complete but strategically shallow. And in a regulated environment like EBPs, that’s a risk organization can’t afford.
What a Strong EBP Audit Actually Looks Like
High-quality EBP audits don’t just verify balances, they challenge the system.
They focus on:
  • End-to-end flow of participant data
  • Timing and accuracy of contributions
  • Depth of reliance on service organizations
  • Alignment with plan documents and ERISA requirements
  • Real-world operational risks, not just reported numbers
Because ultimately: An EBP audit is less about numbers and more about accountability.
How BDO EDGE Approaches EBP Audits Differently
At BDO EDGE, we approach EBP audits with one core principle:
If risk sits in operations, the audit must go there.  We don’t stay at the surface level of financial reporting.
We go deeper into processes, dependencies, and control environments.

Our Focus Areas
We bring precision to areas that matter most:
  • Participant data integrity (eligibility, compensation, vesting)
  • Contributions – accuracy, completeness, and timeliness
  • Benefit payments – authorization and compliance
  • Investment reporting and valuation
  • Service organization reliance and SOC 1 evaluation
  • ERISA compliance and Form 5500 readiness

Our Approach
  • Risk-driven planning, not checklist execution
  • Direct engagement with plan operations
  • Critical evaluation not passive reliance
  • Continuous communication with plan sponsors
  • Alignment with timelines and regulatory expectations

What Clients Experience
  • Fewer surprises during finalization
  • Reduced rework and audit fatigue
  • Stronger compliance positioning
  • Better clarity over plan risks

Final Thought
In Employee Benefit Plans:
  • Assets are significant
  • Regulations are strict
  • Accountability is personal
But audit approaches haven’t always evolved accordingly.
That gap isn’t obvious. But it’s real. And closing it requires more than compliance. It requires intent, depth, and the right partner.