401k Plan Audit Requirement
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Do I Need a 401(k) Audit?
A participant is defined as follows:
If the number of participants reported in Part II, line 6, of Form 5500 is between 80 and 120 and a Form 5500 was filed in the prior year, the filer may elect to complete the current year’s Form 5500 in the same category (large or small Plan) as was filed in the previous year. For example, if the number of participants at the beginning of the Plan year is 110, and a Form 5500 was filed in the previous year as a small Plan, the filer may elect to continue to file the short form and forego the audit requirement. However, if the participant count is 121, then regardless of what category of Plan was filed in the previous year, the current year’s form 5500 must include Schedule H and the Plan must be audited.
Since the audit requirement is solely dependent on the number of participants, an accurate participant count is critical. A Plan sponsor has the option of distributing participant account balances for inactive participants providing their vested account balance is $5,000 or less. Accordingly, if your participant count is such that you may be required to have the Plan audited, you may consider distributing inactive account balances under $5,000 to the participants prior to the end of the Plan year. How do you tell if you have over 100 eligible participants? Check your 401 (k) Form 5500 as filed. If the total number of eligible participants at year-end are over 100, your 401 (k) Plan is required to have an independent CPA Firm audit for this year. If you start at less than 80 you do not need an audit until you have 120 participants.
AUDITED EACH YEAR
CUSTOMER SATISFACTION