R and A CPA

Employee Benefit Plan Audit Requirements

The employee benefit plan you sponsor could be required to have an annual financial statement audit as a result of changes in participant base and/or new regulations issued by the Department of Labor. The Department of Labor now requires all pension plans – both 401(k) and 403(b) – with 100 or more participants to file audited financial statements with their Form 5500. This page will help you determine if your plan requires an annual financial statement audit.

Who must file an Annual Report?

• All pension benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974 (ERISA) must file a Form 5500 every year. (See Code section 6058 and ERISA sections 104 and 4065.)
• Plans with 100 or more participants at the beginning of the plan year must follow filing requirements of a large plan. Plans with less than 100 participants at the beginning of the plan year should follow filing requirements for a small plan. Plans with between 80 and 120 participants at the beginning of the plan year may follow filing requirements in the same category as was filed in the previous year. (See DOL Regulation 29 CFR 2520.104.46, as amended)

What plans are required to file the Annual Report and Audited Financial Statements?

• Employee benefit plans subject to Part 1 of Title I of ERISA (large plans) require an audit. Recent regulatory changes from the Employee Benefits Security Administration, the IRS, and the Pension Benefit Guaranty Corporation have made the reporting rules for ERISA 403(b) plans match the reporting rules for ERISA 401(k) plans.

Which plan administrators must engage an independent qualified public accountant?

• Employee benefit plans filing Form 5500 as a “large plan” are required to engage an independent qualified public accountant. (See ERISA section 103(a)(3)(A)) This requirement applies to both 401(k) and 403(b) large plans.

Are ‘small’ employee benefit plans exempt from audit requirements?

• Small pension plans are only exempt from audit requirements to the extent that at least 95% of their assets are qualifying plan assets. (See ERISA section 103(a)(3)(A))
• Small pension plans not meeting the qualifying plan asset test may avoid the audit requirement if all nonqualifying plan assets are covered by an ERISA section 412 fidelity bond.
• All small plans that wish to avoid the audit requirement must also make certain required disclosures to plan participants.

What financial reports are required by ERISA?

• ERISA requires a statement of assets and liabilities and a statement of changes in net assets available for benefits. Large plans are also generally required to attach a report from an independent qualified public accountant. (See ERISA section 103(a)(3)(A))
• The Schedules required by ERISA, if applicable, include Schedule H, line 4i – Schedule of Assets (Held at End of Year) and Schedule of Assets (Acquired and Disposed of Within Year), Schedule H, line 4j – Schedule of Reportable Transactions, Schedule G, Part I – Schedule of Loans or Fixed-Income Obligations in Default or classified as Uncollectable, Schedule G, Part II – Schedule of Leases in Default or classified as Uncollectable, and Schedule G, Part III – Nonexempt Transactions.

As members of the American Institute of CPAs Employee Benefit Plan Audit Quality Center (the “Center”), R&A CPAs understands the complex rules and regulations employers must adhere to as a sponsor of an employee benefit plan. R&A can help you determine if your plan requires an audit or if your plan qualifies for a waiver from audit requirements.

For more detailed information about audit requirements for employee benefit plans, refer to the Department of Labor, ERISA guidelines, or the IRS. You may also contact us with any questions or click here to see why R&A is uniquely qualified to help you with your employee benefit plan audit`.