What is the primary purpose of a 401(k) plan audit?

The primary purpose of a 401(k) plan audit is to ensure compliance with IRS and ERISA regulations. These audits serve to verify that the plan is operating according to the established federal laws governing retirement plans, which include ensuring that contributions are calculated correctly, benefits are paid out as intended, and that the plan follows the required reporting and disclosure rules. Compliance audits help to protect both the plan participants and the plan sponsors by identifying any discrepancies or issues that may arise and ensuring that they are addressed in a timely manner.

The other options do not align with the primary objectives of a 401(k) plan audit. Evaluating employee performance pertains more to human resources practices than to the financial and regulatory compliance of a retirement plan. Assessing market trends for investment options is part of the investment management process and not the focus of an audit. Increasing overall contributions to the plan may be a desired outcome of good plan management but is not a function of the audit process itself.