Does Your Benefit Plan Require An Audit Under New Guidance? 

Posted on Tuesday, August 01, 2023

Form 5500 and Benefit Plan Audit Requirement Changes 

In February of 2023, the Department of Labor introduced new instructions for filing Form 5500.  Amongst the changes was a modification of the participant count method used by plan sponsors to determine eligibility. Due to this change, the Department of Labor estimates that approximately 19,442 fewer plans will require an audit for 2023. 

Key Changes 

Under the new rule, participants will be counted based on their account balance at the beginning of the plan year. Previously, the count included eligible participants, regardless of their participation or account balance. Eligible participants who have never participated or made contributions resulting in an account balance will no longer be considered in the participant count. Plans with fewer than 100 participants can utilize the simplified "Small Plan" Form 5500 and are exempt from audit requirements. 

80-120 Rule 

The “80-120” rule is still effective. Therefore, if your count falls between 80 and 120 participants, you have the option to file the same form (5500-SF or 5500) as you filed for 2022. 

Effective Date 

The revised counting methodology applies immediately to plan years starting on or after January 1, 2023. It's important to note that filings for plan years commencing before January 1, 2023, must adhere to the previous participant counting method, which includes eligible non-participating participants. 

Benefits for Plan Sponsors 

With upcoming changes to eligibility provisions through the SECURE Act, the revised participant count methodology may help offset the potential increase in participant numbers. It may enable more plans to maintain their status as small plans, saving time and audit costs.  

Additionally, it allows larger employers to offer benefit plans and existing plan sponsors to expand eligibility without triggering an audit. Compliance remains crucial for all plans, and it is essential to collaborate with knowledgeable benefit plan auditors to ensure compliance oversight and maintain plan compliance. 

If you have additional questions or need help understanding the audit requirements specific to your plan, please reach out to Zach Richards, CPA, CFE.

Posted in Employee Benefit Plan Audits

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