New Auditing Requirements for 403(b) Plans with Fiscal Years Beginning On or After January 1, 2009

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.


Earlier this year, the U.S. Department of Labor (DOL) released new regulations regarding audit requirements for 403(b) plans. The new regulations eliminated an exemption previously granted to 403(b) retirement plans from the annual Form 5500 reporting, disclosure, and audit requirements under Part 1 Subtitle B of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The new Form 5500 will require many 403(b) plans to be audited that did not have to be audited in the past.

The new requirements apply to plans with fiscal years beginning on or after January 1, 2009. However, the revised Form 5500 requires that the Statement of Net Assets be fully comparative, so it is in an organization’s best interest to begin planning as early as possible in order to provide accurate information for Fiscal Year 2008.

Beginning on the January 1, 2009 implementation date, most plans that are subject to the Employee Retirement Income Security Act (ERISA) and have 100 or more eligible participants will need to have their 403(b) plans’ financial statements audited. These audited statements will need to be attached to the plans’ Form 5500 upon submission.

The new regulations, according to the IRS, will require plan sponsors to:

  • establish documentation standards
  • create requirements for working with investment providers
  • supply guidance on qualification standards
  • establish deferral deposit rules similar to a 401(k)
  • clarify related employer rules
  • supply termination privileges

All plans should have a written plan document and must come into compliance under the new regulations by January 1, 2009.

The regulations for 403(b) plans were first introduced by the IRS in 1964, and there has been little guidance on them since that time. The new requirements of Form 5500 represent the first time meaningful information regarding these plans will be reported.

Form 5500 Filing Calendar

Plan Year-EndForm 5500 Due DateExtension Due DateFinancial Statement Periods to be PresentedDecember 31, 2009July 31, 2010October 15, 2010December 31, 2009 plan year (with comparative December 31, 2008 statement of net assets available for benefits)June 30, 2010January 31, 2011April 15, 2011June 30, 2010 plan year (with comparative June 30, 2009 statement of net assets available for benefits)September 30, 2010April 30, 2011July 15, 2011September 30, 2010 plan year (with comparative September 30, 2009 statement of net assets available for benefits)

The audit process for 403(b) plans will be similar to the process for a 401(k) or 401(a) plans, which are both defined contribution plans. Auditors can prepare the form 5500 as part of the process for those plans that do not have their Form 5500s prepared by the plan administrator or custodian. Typically, the audit process takes approximately three weeks, commencing with a planning session to prepare for the audit, three to five days of fieldwork, and concluding with a final audit report for the plan.

To ensure you are prepared for your plan audit, we recommend you speak with your audit firm in advance and obtain a list of necessary items. The new regulations require that all plans must have a plan administrator. For many plans this is a third-party administrator. Additionally, plans typically have a custodian or trustee that holds plan assets. It will be important to become knowledgeable about who provides which records so you can efficiently coordinate the preparation for the audit.

Some of the key information you will need to prepare for your plan’s audit are:

  • Plan investment records, including the ERISA certification statement if a DOL Limited Scope audit is to be performed
  • participants’ records, including compensation and eligibility data
  • claim and distribution records
  • loan records
  • contribution records, including both employee and employer contributions
  • administrative expense records
  • reconciliation schedules for plan assets
  • results of non-discrimination tests
  • a draft of the Form 5500 if prepared by custodian/trustee or plan administrator

The employee benefit plan audit process can be both helpful and seamless if you are properly prepared and know what to expect.