SR Client Question: Does my benefit plan need an audit?

  • January 27, 2015
  • Marianne Lilly, CPA, CGMA, CFE

401kThe Internal Revenue Service and the Department of Labor require that Form 5500 be filed for certain benefit plans including Profit Sharing and 401(k) Plans (hereinafter “Plans”) regardless of the number of participants. Plans with over 100 participants at the beginning of the Plan year are also required to have an audit of the Plan’s financial statements conducted by an independent public accounting firm. The audited financial statements are attached to the Plan’s Form 5500 filing.

The audit requirement can be confusing as it is based on a few factors:

  • The audit requirement is based upon the number of participants as of the beginning of the Plan year. Thus for Plan years ended December 31, 2014 the number of participants as of January 1, 2014 is what is considered when determining if the Plan has an audit requirement.
  • The participant count includes any individual who is in employment which is covered by a Plan and who is earning or retaining credited service under the Plan. Thus an employee does not have to be contributing to the Plan to be considered a participant for purposes of the participant count.
  • There are additional individuals who may also be considered participants – even if they are not currently contributing.

Under the “80 to 120 Participant Rule”, if the number of participants covered under a Plan as of the beginning of the Plan year is between 80 and 120, and a small plan annual report was filed for the prior year, the plan administrator may elect to continue to file as a small plan and may claim an audit waiver.

As companies grow and the number of participants increase, Plans may exceed the 100 participant mark and Plan sponsor are faced with a first time Plan financial statement audit. The initial filing deadline for Form 5500 filings with audited financial statements for December 31, 2014 Plan year ends is July 31, 2015. So now is the time to take look at your Plan participant count to determine if your Plan needs an audit. Your Plan’s Third Party Administrator should be able to tell you if the Plan has a first time audit requirement or contact the audit department at ShindelRock and we can help you.  If your Plan does require an initial audit (or if you are looking to change Plan auditors), let ShindelRock make the audit process as smooth and efficient as possible.