401(k) audit requirements

[Guest J Snelling]

I am determing if we should have a 401(k) audit for 2008 and need help. The plan had 65 employees participating in 2008. Of course, some of these employees were terminated before 12-31-2008. The plan has 29 eligible to participate in 2008, but did not. Of course, some of these employee were terminated before 12-31-2008, but all was elgible to particpate before reaching termination date. In addition, we have 16 terminated (terminated prior to 2008) employees with account balances. Are we considered a small or large plan?

[Bill Presson]

I am determing if we should have a 401(k) audit for 2008 and need help. The plan had 65 employees participating in 2008. Of course, some of these employees were terminated before 12-31-2008. The plan has 29 eligible to participate in 2008, but did not. Of course, some of these employee were terminated before 12-31-2008, but all was elgible to particpate before reaching termination date. In addition, we have 16 terminated (terminated prior to 2008) employees with account balances. Are we considered a small or large plan?

The only test is how many people were eligible to participate on January 1. That includes any employees that became eligible on January 1, so it's not the same number as December 31, 2007. It also includes terminated participants with account balances.

Now, assuming the plan was effective in a year before 2008, that number would have to be more than 120 to be required to have an audit.

[Guest J Snelling]

I am determing if we should have a 401(k) audit for 2008 and need help. The plan had 65 employees participating in 2008. Of course, some of these employees were terminated before 12-31-2008. The plan has 29 eligible to participate in 2008, but did not. Of course, some of these employee were terminated before 12-31-2008, but all was elgible to particpate before reaching termination date. In addition, we have 16 terminated (terminated prior to 2008) employees with account balances. Are we considered a small or large plan?

The only test is how many people were eligible to participate on January 1. That includes any employees that became eligible on January 1, so it's not the same number as December 31, 2007. It also includes terminated participants with account balances.

Now, assuming the plan was effective in a year before 2008, that number would have to be more than 120 to be required to have an audit.

Thanks! If the amount is 100, our plan is considered large. However, we fall under the 120.

[Guest J Snelling]

I am trying to find documentation on the 120 rules. Do you have any links containing this information. Is this the 80 to 120 participant rule? If so, we filed as a large plan in 2007.

[Kevin C]

Yes, they are referring to the 80-120 rule. The 80-120 rule is in the Form 5500 instructions in the what to file section. The description includes a cite.

If you filed as a large plan for 2007, the 80-120 rule won't help you. The rule lets you file the same way as you did in the prior year if your beginning of year participant count is 80-120. Once you are a large plan, your participant count will have to drop below 100 at the beginning of a year before you can file as a small plan.