Employee Benefit Plan audits are governed through the Employee Retirement Income Security Act of 1974 (ERISA) and U.S. Department of Labor (DOL). Plans with 100 or more participants are considered large plans, and plans with fewer than 100 participants are considered small plans. The annual 401(k) audit is required for all large plans.

 

However, under the 80-120 Participant Rule, you may continue to file the Form 5500 within the same category (small/large) as in the previous year as long as there are between 80 and 120 participants at the beginning of the plan year. If, for instance, you filed as a small plan with 90 participants in 2019 and on January 1, 2020, the count grew 110, the plan could still file as a small plan for the 2020 plan year. On the other hand, if the number of eligible participants reached 121, the plan would need to be filed as a large plan, and therefore, require an audit.

​

For those plans requiring an audit this year, the audit report and financial statements must be attached and the complete Form 5500 must be filed electronically with the IRS by July 31. If needed, you may formally extend the Form 5500 by filing a Form 5558 before the July 31, thereby extending the deadline to October 15.

​

To avoid the penalties for failing to complete the Form 5500 or ramifications of filing late, companies should take the time to understand the requirements for a 401(k) audit well in advance of the July 31st deadline.

​

Not sure if you need an audit? We can help. Contact us today.