401(k) Compliance Audit After Integrating 1,100 Acquired Employees

A global leader in the pest control industry had recently completed an acquisition and integrated acquired employees into its existing 401(k) plan. During the transition, an internal plan analyst identified several contribution irregularities, including delayed implementation of deferral elections and inconsistencies in employer match calculations.

While certain process issues were corrected quickly, leadership recognized that initial findings could signal broader compliance exposure. To fulfill its fiduciary responsibility to operate the plan in accordance with its governing documents, the company engaged SBA to assess the acquisition integration and determine the full scope of potential errors.

SBA conducted a detailed pay-period-by-pay-period compliance review of more than 1,100 participants who transitioned into the plan.

Using payroll data from Workday, the company’s human resources information system (HRIS), and plan data from the recordkeeper, SBA correlated initial deferral elections and election change files to specific payroll periods, calculated expected employee contributions and employer match under the plan formula, and compared those expectations to actual amounts deposited. The team also reviewed eligible compensation classifications, evaluated catch-up contribution limits, and verified whether payroll deductions were transmitted accurately to the recordkeeper.

This analysis revealed several categories of discrepancies, including missed initial elections, employer match overpayments, delayed implementation of deferral changes, and compensation misclassification.

For each affected participant and pay period, SBA calculated the appropriate corrective action and organized the results into structured schedules for implementation. Corrections included qualified nonelective contributions (QNECs) to restore missed contributions as well as adjustments to reverse excess employer match and refund excess employee deferrals where applicable.

The audit identified errors flowing in both directions. Hundreds of participants required corrective contributions to restore missed deferrals or match amounts, while others required reversal of excess employer contributions.

In total, corrections amounted to tens of thousands of dollars in each direction, representing limited net financial impact to the company, but significant improvement in participant-level accuracy and compliance.

All corrections qualified for self-correction under IRS guidelines, allowing the company to resolve the issues without entering the Voluntary Correction Program. By identifying and addressing the errors in a timely and proactive manner, the company strengthened plan governance, reinforced operational controls, and reduced potential regulatory risk.

Following the audit, SBA worked with the company to identify the operational gaps that allowed errors to persist through the transition, then recommended process improvements to ensure future integrations would be handled with greater controls from the outset.