Recent changes by the U.S. Department of Labor to the Form 5500, Form 5500-SF, and related instructions will impact future audit requirements for employee benefit plans.
Understanding the Plan Audit Requirements
Historically, an employee benefit plan has been required to receive an annual audit by an Independent Qualified Public Accountant (IQPA) when filing its Form 5500 as a ‘large plan’.
In general, a large plan designation is required when the plan exceeds more than 100 eligible participants as of the beginning of the plan year.
For purposes of this count, an eligible participant has been defined as anyone eligible to participate in the plan, regardless of an election to participate or maintenance of an account balance.
Changes for Plan Years Beginning in 2023
Pursuant to the release of a Federal Register Notice on February 24, 2023, certain changes to the Form 5500 will be effective for plan years beginning on or after January 1, 2023.
One of these revisions relates to a change in the participant-counting methodology for determining whether a plan is eligible for a simplified small plan filing on Form 5500-SF.
The new requirements to file as a large plan (and therefore receive an audit by an IQPA) will be based upon the number of participants with account balances as of the beginning of the plan year, as opposed to the number of eligible participants.
Accordingly, certain plans who filed Form 5500 as large plans during the 2022 plan year will not be required to have an audit for the 2023 plan year.
Monitoring of participant counts on an annual basis will be important, as plans may again meet audit requirements in a subsequent year, through increased participation or implementation of other plan changes affecting eligibility.
Regardless of audit requirements, plan sponsors should continue to meet their fiduciary responsibilities, with a significant focus on plan compliance, administration, and oversight.
For specific questions about how your plan may be impacted, please reach out to us!
Debbie Herbert
Senior Manager
Phone/fax: 812-405-1733
Email: dherbert@blueandco.com
or
Abby McDonough
Manager
Phone/fax: 317-275-7421
Email: amcdonough@blueandco.com
