# How Audits Work for PEP Plans (PEP Audit Guide) Source: https://planprovider.pro/blog/how-do-audits-work-for-pep-plans > Learn how PEP plan audits work, who is responsible, and how to choose a PEP auditor to support Form 5500 compliance and reporting. April 18, 2026 Pooled Employer Plans (PEPs) can simplify retirement plan administration, but they don’t eliminate audit and Form 5500 responsibilities. Here’s how PEP audits work, who sponsors and oversees them, and what to expect from PEP-capable audit firms. Pooled Employer Plans (PEPs) are designed to make retirement plan sponsorship easier for employers by centralizing many fiduciary and administrative functions with a pooled plan provider (PPP). But employers are often surprised to learn that PEPs can still involve an annual independent audit—just structured differently than a traditional single-employer 401(k) audit. Below is a plain-English guide to **how audits work for PEP plans**, including who is responsible for what, who “sponsors” the plan, and what to look for in an audit firm that truly understands PEP reporting. ## What is a PEP audit (and when is it required)? A PEP audit is an **independent financial statement audit** of the PEP’s plan financials and certain plan operations, performed by a qualified CPA firm. The audit is generally required when the PEP files a Form 5500 as a “large plan,” which is typically based on participant count under Department of Labor (DOL) rules. Even though adopting employers participate in the PEP, the audit is performed at the **PEP (plan) level**—not separately for each adopting employer—because the PEP generally files a **single Form 5500** for the arrangement (with required schedules and employer-level reporting elements as applicable). If you’re newer to the annual reporting framework, it helps to first understand the filing itself. See our overview of [what a Form 5500 is](/blog/what-is-form-5500) and why it matters. For the DOL’s baseline guidance on reporting and audit requirements, you can also reference the DOL/EBSA Form 5500 page here: [DOL/EBSA Form 5500 fact sheet](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/form-5500). ## Who sponsors a PEP, and who is responsible for the audit? This is the most common point of confusion: in a traditional plan, the employer is the plan sponsor. In a PEP, the structure is different. - **The pooled plan provider (PPP)** is generally the named fiduciary and the primary party responsible for operating the PEP and ensuring required filings are completed. - **Adopting employers** participate in the PEP by signing an adoption agreement and are still responsible for certain employer-level duties (for example, timely payroll contributions and providing accurate employee eligibility/compensation data). Practically speaking, the **PPP typically engages the independent auditor** for the PEP and coordinates the audit process. However, adopting employers should expect to support the audit by providing employer-level documentation and responding to data requests (more on that below). If you’re comparing this to a standard plan audit, our primer on [what a 401(k) audit is and when you need one](/blog/what-is-401k-audit) can help you map the differences. ## How the PEP audit process works (step-by-step) While every firm has its own workflow, most PEP audits follow a similar pattern. The key difference from single-employer audits is that the auditor is testing controls and transactions across a **pooled structure**—often involving multiple adopting employers, a recordkeeper, a trustee/custodian, and the PPP’s internal processes. - **Planning and scoping** The auditor identifies the PEP’s service providers (PPP, recordkeeper, custodian/trustee, TPA, payroll integrations). - The auditor determines what adopting-employer data is needed and whether employer-level sampling will be used. - They align timelines to the Form 5500 deadline (including extensions). - **Information requests (PBC list)** You’ll often hear “PBC” meaning “provided by client.” This is the document/data request list. - In a PEP, the PPP typically compiles plan-level items, while adopting employers may be asked for payroll registers, eligibility support, and proof of remittances. - **Testing and fieldwork** **Contributions**: timing, completeness, and proper allocation to participants. - **Eligibility and deferrals**: whether employees were allowed in on time and deferrals match elections. - **Distributions/loans**: whether approvals, calculations, and taxes were handled correctly. - **Investments and fees**: valuation, participant allocations, and fee reasonableness support. - **Controls**: how the PPP and providers ensure data accuracy across adopting employers. - **Audit deliverables** Audited financial statements and the auditor’s report that accompanies the Form 5500 filing (when required). - Often a list of operational observations or recommended process improvements. - **Form 5500 filing support** The auditor’s report is attached to the filing when an audit is required. - Because PEP reporting can be nuanced, coordination among the PPP, TPA, and auditor is critical. If you want a more detailed checklist of common audit requests, see [what is needed for a 401(k) audit and where to find it](/blog/what-is-needed-for-401k-audit). Many of the same categories apply in a PEP—just split between the PPP and adopting employers. ## What adopting employers should expect to provide (and why it matters) Even though the audit is performed at the PEP level, adopting employers are still part of the evidence trail. Expect requests like: - **Payroll and census support**: payroll registers, compensation definitions, and employee status changes - **Eligibility documentation**: hire dates, termination dates, hours (if applicable), and entry dates - **Deferral election support**: proof of elections and changes (especially if not fully automated) - **Contribution remittance timing**: dates withheld vs. dates deposited - **Employer contributions**: match/profit sharing calculations and approvals This is one reason adopting employers should still care deeply about the PEP’s compliance calendar. Late deposits and data errors can create findings that affect the plan’s reporting and can trigger corrections. And remember: penalties for late or incomplete filings can be significant. For context, see [the high cost of non-compliance for late or rejected Form 5500 audits](/blog/cost-and-penalties-for-late-or-rejected-form-5500-audits). ## Who provides PEP audits? What to look for in a PEP-capable audit firm Not every employee benefit plan audit firm is set up for PEP work. PEP audits tend to require: - **Experience with pooled arrangements** (multiple adopting employers, centralized operations, and employer-level sampling) - **Deep Form 5500 knowledge** for pooled plan reporting and required schedules - **Strong coordination skills** with PPPs, recordkeepers, custodians, and adopting employers - **Clear, repeatable PBC processes** so dozens (or hundreds) of employers aren’t reinventing the wheel As you evaluate firms, start with a directory of specialized auditors and filter by plan type and expertise. You can browse [all employee benefit plan auditors](/auditors), review firms that focus on pooled employer plans in our [PEP 401(k) auditors](/auditors/pep-401k) category, or jump directly to categories like [401(k) auditors](/auditors/401k), [403(b) auditors](/auditors/403b), [defined benefit plan auditors](/auditors/defined-benefit), [ESOP auditors](/auditors/esop), and [health & welfare plan auditors](/auditors/health-welfare). [PEP-capable audit firms](https://planprovider.pro/auditors/pep-401k)** to consider:** - [Pepper Auditors](https://planprovider.pro/provider/pepper-auditors-inc-and-pepper-auditors-pllc) - [Larson & Company](/auditors/larson-and-company) - [Baker Tilly](/auditors/baker-tilly) - [Grant Thornton](/auditors/grant-thornton) - [Boulay PLLP](https://planprovider.pro/provider/boulay-pllp) **Example of a PEP-capable audit provider:** Some audit firms explicitly describe PEP experience and the operational realities of pooled plans (for example, coordinating across multiple adopting employers, aligning with PPP/recordkeeper reporting, and building standardized request packages). When reviewing an auditor’s profile, look for language that indicates they perform employee benefit plan audits at scale and understand pooled plan reporting expectations. If you’re selecting an audit partner as part of a broader governance process, it can also help to involve your advisor. See our guide on [how to hire a retirement plan advisor](/blog/hire-retirement-plan-advisor) and browse [401(k) financial advisors](/plan-advisors/401k) who work with plan sponsors. ## How PEP audits connect to ERISA bonding and other compliance items Audits are only one piece of the compliance puzzle. Most retirement plans subject to ERISA also need an **ERISA fidelity bond**, which protects the plan against losses caused by fraud or dishonesty by people who handle plan funds. If you’re unsure whether the PEP has the right bonding in place—and who is responsible for obtaining it—start here: [What Is An ERISA Bond And How To Buy One?](/blog/what-is-erisa-bond) You can also explore options through our [ERISA bond providers directory](/erisa-bonds). For the regulatory baseline, see the DOL/EBSA resource on fidelity bonding requirements: [DOL/EBSA fidelity bonding fact sheet](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/fidelity-bonding). ## Practical tips to make your PEP audit smoother (for PPPs and adopting employers) - **Standardize data feeds**: automated payroll integrations reduce contribution and eligibility errors. - **Document employer processes**: even a one-page internal checklist helps support audit requests. - **Track deposit timing**: keep a simple log of payroll dates vs. contribution deposit dates. - **Respond quickly to sampling requests**: PEP audits often use employer sampling—delays can hold up the entire engagement. - **Align early on deadlines**: work backward from the Form 5500 due date and build in review time. ## Conclusion: PEP audits are centralized—but adopting employers still matter PEPs can reduce the administrative lift for employers, but they don’t eliminate the need for strong documentation and timely, accurate payroll and census data. In most cases, the PPP coordinates a single plan-level audit and Form 5500 filing, while adopting employers support the process through data and documentation. If you’re evaluating a PEP or already in one, the best next step is to confirm (1) who is engaging the auditor, (2) what adopting-employer items you’ll be expected to provide, and (3) whether the audit firm has clear PEP experience. To start your search, explore our [directory of 401(k) auditors](/auditors/401k) or browse [all auditors](/auditors) to find firms that match your plan’s needs. **Need help building the right provider team?** Consider reviewing your governance partners as well, including [ERISA attorneys](/erisa-attorneys) and [retirement plan providers](/retirement-plans) that support pooled arrangements. [← Back to all posts](https://planprovider.pro/blog)