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Good afternoon to all, We have virtually no experience with MEPs. We have a client who owns two separate businesses and maintains a 401(k) plan for each business. One has well under 100 employees and one is dangerously close to needing an independent audit. There is a new investment advisor to the plans and she is wanting to create a MEP out of the two plans, claiming that there will be lower fees from the recordkeeper if they become a MEP. My question is this: Is this potential new MEP considered one plan with one 5500 to file, and will it now be thrust into the category where it needs an independent audit because it will have over 100 participants with the two companies combined? Your advice is greatly appreciated.

I'm not sure whether this issue is better placed in EPCRS 403(b) or Form 5500 because it applies to all. A client has a 403(b) plan that is now a large plan requiring an audit. The auditor uncovered several operational errors and a lack of adequate procedures to make sure the plan is compliant. The client has investigated the 3 prior plan years and has found similar errors. These are pretty typical errors: the employees may not have been made aware that they were eligible to defer upon hire, some employer contributions didn't start as soon as the participant became eligible for them, some late deferral deposits, contributions weren't always calculated using the correct compensation definition, some investment directions were not followed and contributions were invested in a default fund. The client will be correcting operational failures under EPCRS with a VCP application, with assistance of counsel. They expect to correct the late deposit of deferrals by calculating interest and depositing in participant accounts, without a VFCP application. But here's the more immediate issue. The 5500 is now overdue because the auditor will not issue a report. So a new late filing error has occurred and the penalty amount will continue to increase. The auditor wants all of the failures quantified, and won't proceed until the entire 30 year history of the plan has been investigated to uncover all errors. This appears to be unique to the first audit year because opening balances have to be verified. But when corrections are made, aren't they deposited and credited to the account in the current year? I have submitted many VCP applications that correct for multiple years (for large plans) and have never heard that the 5500 should be redone for prior years because the errors mean that the opening balances aren't correct. Is an auditor able to issue a qualified opinion in these circumstances - stating the types of errors that were found and indicating that the sponsor is working with counsel to make appropriate corrections? May be a separate question whether the DOL/IRS would accept this. There has to be a way to move forward and get the 5500 in (even if it needs to be corrected later) before the investigation is completed for prior years, the VCP application filed and a compliance statement received.