Audit Requirement for Multiple Employer Plan

[Guest CSTS]

We are considering consolidation of three companies with common ownership, but not a controlled group. Each of the three employers would participate in the Plan and could raise the plan's eligible employee number to 120+. If we exceed 120 on a plan basis, but no single employer has 100 eligible, must the Plan attach an audit and do we still file the Long Form? Under the old format (multiple 5500's with only Sch. T) that was clear. Anyone have any experience with this scenario yet? I realize we file one Form 5500 and a Schedule T for all participating employers, but how does the audit requirement change?

[Archimage]

Yes, the plan is a large plan and must have an audit and must file Sch H.

[Guest CSTS]

Not to be a skeptic, is there any place I can find reference to this rule? I researched the ERISA Outline and didn't find reference to my question and tried the 2004 Form 5500 Instructions without any luck. I wanted to document it in My Multiple Employer research folder.

Thanks for the reply.

[pmacduff]

The audit requirement is based upon the number of "plan participants". When you file the 5500 for the Multiple Employer Plan (it is one plan) and there more than 120 "particpants" you must have an audit. Even though you are testing each Employer as a separate plan, there is really only one plan in which all are participants. I don't think you will find it anywhere as a separate issue because, again, the audit requirement is based upon the number of plan participants which is all encompassing in the multiple employer plan. Hope this helps.

[Guest CSTS]

Thank you both for your answers. I was also able to confirm the requirement with an investment company that specializes in MEP's. It make sense, just hoping that some exemption might apply.

[Guest SRPS Ohio]

I have a related question concerning multiple employer plans.

We have prospect that sponsors a qualified plan for a group of 40 franchisees under one plan document. Since all the individual adopters are under 100 participants, the sponsor has each of them file their own complete Form 5500 in order to avoid the Form 5500 audit requirement for the group as a whole.

This does not seem correct to me since one plan document usually means only one Form 5500 filing. Am I wrong?

[Ron Snyder]

If the 40 "franchisees" are truly separate and independent of each other, their use of the same document would not make the plan(s) a MEP. However, the plan language might. Likewise, filing separate 5500s (which has to cost more than an audit anyway) does not make these individual plans. The facts and circumstances will make the determination.

To verify the existence of separate plans or a MEP, obtain answers to the following:

Did they adopt by separate adoption agreements or by adopting the plan as is in their minutes? Do all employers have the same plan provisions (eligibility, contributions, investments, retirement eligibility, vesting, payout forms, etc.)?