Avoiding the Cost of an Annual Plan Audit Just Got Easier for Thousands of Employers
In welcomed news, under newly released DOL regulations, the Department of Labor (DOL) has updated the Form 5500 filing requirements to reduce the number of plans that will be required to obtain an annual audit. The rule remains that retirement plans with 100 or more participants must obtain an annual audit report from an independent qualified public account. For plan years beginning on or after January 1, 2023, however, when counting the number of participants in the plan to determine if an audit is needed, only participants/beneficiaries who have an account balance must be taken into account. This is a change from the current rule which requires that you count all employees eligible to participate in the plan whether or not they actually participate in the plan.
Plans may continue to use the “80 to 120 Participant Rule” to avoid audits. This rule allows plans with between 80 to 120 participants at the beginning of the plan year to file the Form 5500 in the same category (“large plan” or “small plan”) as the prior year filing. If you filed as a “small plan” last year and you have fewer than 121 plan participants at the beginning of this plan year, you do not need an audit and may continue to file Schedule I as a small plan.
With average costs between $8,000-$12,000 a year to obtain an audit, the DOL’s guidance provides a much-appreciated cost savings for those plans hovering near 100 participants who may find they will no longer need to incur the added expense. If you have any questions about this new rule or any of the other provisions of the updated Form 5500 regulations, please contact any of Bricker Graydon’s Employee Benefits attorneys.