How Mergers and Acquisitions Are Impacting Retirement Plan Audits

The retirement plan landscape is undergoing significant transformation as service providers consolidate and companies merge. These changes, driven by market forces and regulatory developments, have profound implications for audit work on employee benefit plans (EBPs). Understanding these transactions is critical for auditors, plan sponsors and fiduciaries navigating an increasingly complex environment.

Why Consolidation is Happening

The trend toward mergers among record-keepers, custodians and third-party administrators (TPAs) mirrors broader retirement industry consolidation. Large providers seek economies of scale, advanced technology and expanded service offerings. For plan sponsors, this often means access to better tools and potentially lower fees. Plan sponsors are also engaging in a lot of activity whether through company mergers, acquisitions, divestitures or other similar events. It is important for plan sponsors and auditors to understand the ripple effect these transactions can have on audit procedures.

Impact on Audit Risk Assessment and Internal Controls

When nonroutine transactions such as plan transfers occur, auditors should review their risk assessment as part of their planning procedures. Materiality thresholds may need reevaluation to reflect increased complexity and potential for misstatement. It is important to tailor the audit risk assessment and response to risks depending on what type of transaction occurred.

For example, a change in recordkeeper or custodian, whether by the plan sponsor’s choice or due to the constant recordkeeper consolidation occurring in the industry, may be considered as an overall pervasive risk affecting the financial statements as a whole. When multiple control environments exist throughout the year, auditors should consider the impact on controls, including the utilization and coverage of System and Organization Controls (SOC) 1 Type II reports, especially the IT environment, to properly address IT risks emphasized in Statement on Auditing Standards (SAS) No. 145.

However, in other situations where a plan merged in or the plan spun off a division into a new plan, the auditor should consider if this transaction is a significant class of transactions and account disclosure to scope into their risk assessment as an assertion-level risk. These types of trans­actions may elevate inherent risk from low to moderate or high. For plan mergers in, auditors may also want to consider if the merged-in plan was previously audited. For unaudited plans, auditors should consider obtaining historical records of the merged-in plan to determine if the balance transferred in appears reasonable and complete. Materiality, complexity of the transaction and controls of the predecessor plan are all key factors to consider when designing plan-appropriate audit procedures.

Response to Risk Through Substantive Procedures

Gaining an understanding of the effective date of the transaction to ensure the transfer is recorded in the proper period is crucial to auditing the transaction in the correct period. The effective date is the date the plan assets are legally transferred to the control of another plan. Management should provide the auditors with any relevant plan provisions that can be found in either plan documents or plan amendments, board resolutions, minutes or other equivalent support, to support the effective date. Knowing the effective date is essential for reporting, since asset transfers may happen on a different day.

Reconciliations of plan assets should be performed to ensure the accuracy and completeness of net assets between the two recordkeeping platforms. In addition, substantive testing on a participant level should be performed. Some key questions to consider: Did individual balances transfer properly? Are participant investment allocations mapped correctly? Did contribution sources allocate accurately? Are vesting provisions being calculated in accordance with the plan provisions?

Form 5500 Reporting Considerations

As Form 5500 is reviewed for any material inconsistencies, auditors should determine if the transfer is accurately recorded on Schedule H Part II and that compliance questions on Schedule H Part IV are addressed appropriately to ensure all merged in/out plans are adequately disclosed. It is also important to consider when plans merge, as the timing of the final Form 5500 filings depends on when assets legally trans­fer, which can create potential for “one-day audits” if the merger occurs on Jan 1. This is different from a plan termination, in which the final Form 5500 will occur when the assets are fully distributed out.

Final Thoughts

There are several audit considerations to keep in mind as consolidation and mergers and acquisition activity continues in the retirement industry. Discussing these with plan sponsors and fiduciaries ahead of time can prepare them for what’s to come to ensure a quality audit. 

---

Jamie Polak Jamie Polak, CPA, is a technical director at CliftonLarsonAllen LLP (CLA) and is a member of the NJCPA. Learn more from Jamie Polak: 5/21/26 - Audits of Employee Benefit Plans Conference