When Is A Retirement Plan Audit Required?

When Is A Retirement Plan Audit Required?

Understanding when audited financial statements of a retirement plan are required to be attached to a Form 5500 is an important part in demonstrating fiduciary responsibility over the plan and preventing unnecessary fines for an invalid filing of the 5500. The following are important concepts for understanding if your plan needs an audit of the financial statements:
  • Determining whether an audit is needed is based upon the number of eligible participants (and not just actual employees participating) as of the beginning of the plan year. As an example, a 401(k) plan might have only 20 employees actually participating, but if 150 employees are eligible, the plan would require in audit.
  • The mandatory audit requirement begins when the number of eligible participants reaches 121 at the beginning of the plan year.
  • Upon reaching 121 eligible participants, the mandatory audit requirement continues as long as there are more than 100 eligible participants.
  • The audit requirement is no longer mandatory when the number of eligible participants decreases below 100.

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your plan’s individual facts and circumstances.

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