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InStep® 1: Fiduciary Audit

audit InSight follows the fi360 Fiduciary Quality Management System, staring with an audit. Called the InStep® process, it is a designed and implemented plan for clients in accordance with the prudent practices set forth by fi360. We offer two levels for plan sponsors to begin reviewing and audit their current 401(k) and corporate sponsored plans.

What You Can Review During a 401k Plan Self Audit

Companies interested in performing a self audit can find the InStep® Self-audit tool here.  <FORM FOR SELF AUDIT REQUEST> 

401k Audit

What Our Auditors Review During a 401k Plan Audit

Our InStep® – Fiduciary Audit will focus on 4 areas:  Our Accredited Investment Fiduciary (AIF®) will analyze and conduct a thorough audit to make sure the plan is operating within the guidelines of the plan-related documents. Documents will be reviewed in accordance with fi360’s prudent practice to make sure the financial information is reported correctly and the corporate plan is governed properly. A report will be prepared and delivered to the sponsor and investment committee upon completion.

Common Errors found in an Audit

Plan Document Failures

These occur when there are incongruencies between the administration of the plan and the governing documents. These can be from both forced and unforced errors that result from a lack of education, clarification, or issues with how the plan documents were written. Issues can also arise when changes to the plan are made over generations of investment committees and changes in one element are not received though the plan documents. 

Plan Operational Errors

Operational errors are largely transactional, they stem from execution issues in the plan and while costly mistakes occur, they are less persistent in plan administration. These arise either when a transaction isn’t in accordance with the plan document, participant’s instructions, or when the plan fails the non-discrimination test and the timely corrective action isn’t taken. Some common operational errors include:
  • Failure to communicate plan changes in a timely manner
  • Failure to admit participants timely
  • Incorrect contribution amounts
  • Incorrect vesting percentages distribution
If an error is discovered during a 401k plan audit, the error needs to be corrected within the plan and with the Department of Labor and IRS. The most common errors can be corrected through the IRS’ employee plans compliance resolution system (EPCRS). This will help remedy your mistakes and avoid the consequences of plan disqualification by the IRS.  There are three ways to correct mistakes under EPCRS:
  1. Self-Correction Program (SCP) – permits a plan sponsor to correct certain plan failures without contacting the IRS or paying any fee.
  2. Voluntary Correction Program (VCP) – permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures.
  3. Audit Closing Agreement Program (Audit CAP) – permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit.

Investment Policy Statement Drafting

InSight can support plan sponsors who are looking to draft the initial IPS or revise an existing IPS as a point solution. The drafting of the IPS is a quintessential part of the proper management of the corporate plan. This is a cornerstone of the InStep® process and a requirement of all of the clients we work with. Using our AIF® ‘s to review or draft an IPS for your company will provide an extra layer of coordination, completeness, and insolation for legal challenges down the road.

Asset Selection Audit

InSight can review and offer a run down of your existing investment options, fees, and benchmarks associated with that list as a point solution. A cursory review of the investment options saves your team time by gathering information on the performance of your investments. An objective review of those holdings by an investment advisor can be a great diagnostic data point to determine if your investment process and asset selection is sound.   

Ensure Plan Compliance

Confirming you have strong internal controls brings peace of mind to plan sponsors and is key to plan compliance. The plan sponsor should read and fully understand the plan document and know that the administration of that plan is sound. Taking responsibility for the operations of the plan can be time consuming and stressful. A thorough review of the compliance is helpful to put those fears to rest.  Companies should obtain the SSAE 16 report in association with a compliance review.   Even if your company has a small plan, there are less than 100 participants, and a 401k plan audit isn’t required, it’s still very important that your plan is operating in strict accordance with the guidelines of the plan-related documents and that the plan is in compliance with certain Department of Labor and IRS regulations.

Engagement Letter of Intent

On the heels of an audit clients can choose to engage InSight for assistance with Investment Policy Statement Drafting or Asset Selection Audit as point solutions, or sign an engagement letter to begin the InStep® process in earnest. This engagement letter will kick off the rest of the InStep® program. <DOWNLOAD THE INSIGHT INSTEP ENGAGEMENT LETTER OF INTENT>
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