How Can a PEP Simplify Your 401(k) Audit Experience (and Cost)?
Auditing a 401(k) plan can often be a time-consuming, expensive and stressful process for businesses. Fortunately, pooled employer plans (PEPs) offer a game-changing solution. By participating in a PEP, businesses can drastically simplify the 401(k) audit process — and even eliminate audit costs altogether in some cases.
Here’s how a PEP can transform your retirement plan audit experience.
The Traditional 401(k) Audit Challenge
Businesses that sponsor a standalone 401(k) plan with 100 or more eligible participants are required to undergo an annual employee benefit plan (EBP) audit. These audits can be:
- Time-intensive, pulling HR and finance teams away from daily operations.
- Expensive, often costing $10,000 to $20,000 or more.
- Stressful, due to complex compliance and fiduciary requirements
For small and midsize businesses, the audit requirement often feels like a heavy burden.
How Pooled Employer Plans (PEPs) Simplify the Audit Process
1. One audit for the entire PEP. When you join a PEP, your company becomes part of a larger plan. Instead of conducting an individual audit for your business’s 401(k) plan, the pooled plan provider conducts a single, plan-wide audit. That means:
- No separate audit costs.
- No extensive audit preparation work.
- Significantly less disruption to your internal teams.
2. Shared audit costs (or none at all). Because the PEP undergoes a single audit, the cost is either absorbed by the plan provider or shared among participating employers — at a fraction of what businesses would otherwise pay individually. In some cases, no direct audit cost is passed on to the employer.
3. Less fiduciary risk. The PEP provider typically assumes fiduciary responsibilities for administrative and investment oversight, reducing your company’s liability in the eyes of auditors and regulators.
4. More streamlined compliance. PEPs are designed to maintain tight compliance controls, which means fewer audit findings and faster resolution of any issues that do arise. This reduces the time and resources you need to dedicate to audit preparation and remediation.
Additional Benefits of a PEP Beyond the Audit
- Lower overall plan administration costs.
- Access to institutional-quality investment options.
- Increased employee satisfaction due to better plan features.
- Simplified plan management through professional third-party administration.
By joining a PEP, employers gain a scalable, professional solution to offer retirement benefits without the traditional burdens of plan management.
A pooled employer plan not only simplifies your 401(k) audit experience but also helps lower costs, reduce risk and free up valuable resources. For businesses looking to offer competitive retirement benefits without the overwhelming compliance demands, PEPs are an increasingly smart choice.
Interested in learning whether joining a PEP is the right decision for your organization? Connect with a retirement plan advisor today to explore your options!