5500 Audit Requirements

[Guest SANSIMA]

I have a profit sharing plan that has not made a contribution in about 3 years. In 1999 line 6, BOY participants of the 5500 was 109. Line 7f of the same 5500 was 148. I am assuming that 148 is my BOY, for the 2000 form 5500. Up until the new forms this client always filed the ez form because they were always under 100 participants.

I am correct that for the 2000 5500 this client needs an audit report??

Thanks

susan

[Kristina]

You can not automatically assume that there were 148 participants at BOY for 2000 just because there were 148 participants at EOY 1999. You must look at who entered the plan on the first day of the plan year which would increase your count and who may have terminated/and paid a distribution on the first day of the plan year which would decrease your count.

You are correct that if the BOY number on Item 6 of the 2000 5500 is greater than 120, you are required to have an audit of the plan. If the number of the participants is less than 120, you may continue filing as a small plan.

Have you reviewed the plan provisions to see when terminated participants with no vested benefits can be disregarded for the participant count?

(I believe that you mean that this plan filed the 5500-C/R in the past as the 5500-EZ is for owner participant only plans.)

[Guest ersf]

I agree with Krisitina, the BOY participant counts are not just a duplication of the EOY on the previous form. All new entrants must be taken into consideration.

Although, most 5500s are completed by transfering the previous EOY count to the BOY for the current year.

To answer your question about the audit, yes, the plan is required to have an audit if it is over 120 particpants for two years in a row. If it fluctuates from year to year, under 120 over 120, then an audit would not be necessary. The audit is required for plans over 120 consistntly.