John ATL

That makes sense. Thanks!

Can't remember seeing this addressed, so... Are there any circumstances under which a brand-new 401(k) would now meet the audit requirements in its initial year? I can see any number of participants being eligible to participate at plan inception, but adding participant balances would take time after the implementation date (i.e. start of the plan year), resulting in no participants with beginning balances. Am I missing something?

All guidance I've seen simply requires reporting to be consistent from period to period. That shouldn’t preclude a (very) occasional change in method with good reason. That said, my question as an auditor would be why you want to introduce unnecessary complication? When I get a new plan audit on the modified cash basis, I am overjoyed to go with that. Accrual is an added hassle to reporting (and incurred time) that, really, no fiduciary I’ve ever met cares about as long as everything is correct. (I’m assuming by “cash” you already mean modified cash, which “utilizes the cash basis of accounting while carrying investments at fair value and recording investment income on the accrual basis. All other transactions are recorded on the cash basis.” True cash without investment valuation changes within a plan is too weird for me to visualize.) Plans can be audited on the modified cash basis.

I prefer Gedankenexperiment!

Definitely an asset of the plan- just not sure if it is "held for investment purposes," which is the verbiage in the instructions for the schedule. I'm probably being too literal (CPA, auditor, 'nuff said). I'm really just playing devil's advocate here, and I fully intend to continue reporting it- was just wondering if anyone would have a contrary view at all. Thanks for the input!

I've always seen interest-bearing cash included in the schedule, but something recently made me question whether it should be in the case where the balance is for clearing transactions only and is not a participant-directed or -selectable option. I cannot find a formal definition of "investment assets" or "assets held for investment" and whether that might be to the exclusion of such an account. Still leaning towards including it.