Employee Benefit Plan (401k) Audits

Employee benefit plans are categorized by the Department of Labor as small or large. The number of eligible participants as of the first day of the plan year is the determining factor as to whether a plan is considered to be a large plan. This factor is reassessed every year as of the beginning of the plan year.

401K Benefit PlanA special ERISA rule exists that referred to as the 80-120 Rule. Stated simply, plans with up to 120 eligible participants as of the beginning of the plan year that were classified as a small plan in the prior year may continue to file as a small plan. Once the plan exceeds 120 eligible participants as of the beginning of the plan year, the plan classified as a large plan and an audit is required. In addition, in the plan’s year of formation, the 80-120 rule cannot be applied and an audit is required if the number of eligible participants at the origination of the plan exceeds 100, then an audit is required.

Our Services include the following:

Employee benefit plan audits (401k audit)

Limited scope
Full scope
Defined contribution
Defined benefit

Audits of the following types of plans:

  • Profit sharing / 401(k)
  • 403(b)
  • Stock bonus
  • Employee Stock Option Plans (ESOP)
  • Money purchase

VCP / VFCP submissions (to correct operational errors)

Form 5500 preparation

SAS 70 reports and report reviews


Do you need a 401k audit?

“We started our plan in the middle of the year: Do we need an audit for this year?”

Yes, if you have over 100 eligible participants when the plan was formed. However, if the first plan year is shorter than 7 months in duration, you may elect on Form 5500 to defer the audit of the first, short year until the audit is performed for the first full year plan year.

401K Audit“We terminated our plan, do we need an audit?”

A common misconception regarding plan terminations is that a plan is terminated when the board of directors resolves to terminate the plan or the date that the company notifies its employees. In fact, plans are not officially terminated until the date that a final distribution of assets is made, and there are no longer any participants in the plan. Plans that are in the process of termination must continue to have an audit and also continue to file the Form 5500. A final Form 5500 and audit is required within 7 months of the termination date.

“Help! We received a letter from the IRS / DOL telling us we need an audit and we owe a penalty!”

Contact us – we can help. We will advise and assist with your IRS / DOL correspondence. Should an audit be needed, we can complete it quickly and efficiently.