Participant Audit Guidelines

[Guest Jason_V]

We're looking for specific guidelines for plan audit's in respect to the participants in the plan. Specifically, does the IRS and DOL use beginning plan year participant count or end plan year count? We're under the impression that there is a breakdown of audit guidelines based on the number of participants. I've found the fee structure based on participants but nothing about other audit rules.

[WDIK]

Are you asking when it is necessary for a plan to have an annual examination and report by an independent qualified public accountant (IQPA) or are you referring to some other type of information audit?

[Guest Jason_V]

What we have is a plan where no reporting was done since its inception in 2000. A bank is doing the 2004 and 2005 returns and we are responsible for 2000-2003.

We want to include the following information in our service agreement:

"Audits of the 5500 must be completed for any year in which a plan has over 100 participants at the end of a plan year."

We are under the impression that the participant count determining the audit is at the end of the year, not the beginning. We're looking for clarification on that point.

[JanetM]

The 100 count is as of the beginning of the year. 29 C.F.R. §2520.104-46

[Guest Jason_V]

Thank you, Janet.

[WDIK]

There are also other factors which will determine whether or not an audit of the Form 5500 is necessary, including 80-120 particpant rule and small plan audit requirements.

[Kirk Maldonado]

You will also need an audit if participant contributions can be invested in publicly traded employer stock, regardless of the number of participants.

[BG5150]

You will also need an audit if participant contributions can be invested in publicly traded employer stock, regardless of the number of participants.

Or if more than 5% of the plan's assets were invested in nonqualified assets.

N'est-ce pas?

[Guest stevena1]

Kirk,

We have a plan that for participant count reasons does not need an audit for 2005 but will need one for 2006. In 2005, they put employer stock (publicly traded) into the plan as an investment option. The 11k was filed for 2005.

The attorney seemed to think that the plan did not require an audit for 2005, even though it had employer stock in it. The client attached the 2004 and 2005 5500's to the 11k (but they are not audited, since they were a small plan in 2004 and 2005)

Your post makes me wonder......should we re-look at audit requirement for 2005?

I thought there was some kind of exemption that he mentioned....??

[Kirk Maldonado]

stevena:

The Form 11-K expressly states that an audit is required. You can find the form at: http://www.sec.gov/divisions/corpfin/forms/exchange.shtml.

[Guest stevena1]

I think because #4 says that in lieu of #1-#3, you can submit financial statements as required by ERISA, and they must be audited "to the extent required by ERISA", so we thought since the plan was not required to be audited under ERISA, that simply attaching the financial statements (5500s) would comply.

Are we wrong??

[Kirk Maldonado]

StevenA:

You stopped reading too soon. The following paragraph provides as follows:

Note: A written consent of the accountant is required with respect to the plan annual financial statements which have been incorporated by reference in a registration statement on Form S-8 under the Securities Act of 1933. The consent should be filed as an exhibit to this annual report. Such consent shall be currently dated and manually signed.

[Guest stevena1]

Ugh....I thought so. The attorney was so sure we didnt need one...