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Explanations for the Top Ten Tips to Prepare for an Efficient Audit - Be Prepared to Provide All Applicable Test Results

Various tests must be performed to ensure the plan operates in compliance with current law and is qualified under the Internal Revenue Code. You should have all tests applicable for the year(s) under audit available for review as listed on the Information Document Request attached to the appointment letter. The agent may also request backup documentation to ensure the accuracy of these tests. This backup information may involve records from a prior or subsequent year other than just the year being audited. Examples of testing include:

  • A coverage test that ensures all eligible employees are covered and there is no prohibited discrimination.

  • An actual deferral percentage test (ADP) and actual contribution percentage (ACP) test on plans that provide for employee elective deferrals, employer matching contributions, or employee after-tax contributions to ensure there is no prohibited discrimination.

  • A top heavy test to determine if the accrued benefits or account balances of key employees are such that a top heavy minimum benefit or minimum contribution (and perhaps accelerated vesting) is required on behalf of some/all non-key employees.

  • A Section 415 test to ensure plan benefits or amounts credited to plan accounts does not exceed certain limits.
Page Last Reviewed or Updated: 09-Jan-2017