When is a 401(k) plan audit required?

Generally, a plan audit is required when a plan has 100 or more participants on the first day of the plan year (typically, January 1).  

“Participants” who must be included in the count include individuals:

  • Eligible to participate and enrolled in the plan;
  • Eligible to participate, but not enrolled in the plan; and
  • Participants who have terminated employment with a remaining vested balance in the plan.

However, there is an exemption to the 100 participant count (the “80-120 Participant Rule”). This exemption allows waiver of the audit if your company filed a 5500-Short Form (SF) the previous plan year and the participant count does not exceed 120 at the beginning of the subsequent plan year. Learn more here.

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