Avoiding Independent Audit Requirement

[TPA Bob]

Have a client that is buying up medical related businesses in several states, all doing the same type of business. The client owns 100% of each separate entity. Each entity has about 40 potential participants and all together have about 200 potential participants. Could he have each entity adopt its own plan, each plan identical to the other, file separate Forms 5500, and avoid going over the 120 plan limit for audit? Of the 200 participants only about 40 will actively participate.

[J Simmons]

My understanding is that strategy works.

[TPA Bob]

My understanding is that strategy works.

Thanks.

As a follow-up, what would you say if all of the individual plans used one investment platform (account), all participant directed? Or would you suggest each have its own investment platform?

[J Simmons]

I do not see the use of a common investment platform affecting the ability to keep each plan eligible for the small plan audit exemption.

[Peter Gulia]

In the American Bar Association's annual "ask the government guys (unofficially)" last May, Question 14 was designed to illustrate an abuse situation and give the EBSA staff a reasoning for looking through plans that were designed to evade the requirement to engage an independent qualified public accountant. Faced with the invitation, the DoL answer said that an administrator may treat plans as separate.

2009_EBSA_answers.pdf

[TPA Bob]

In the American Bar Association's annual "ask the government guys (unofficially)" last May, Question 14 was designed to illustrate an abuse situation and give the EBSA staff a reasoning for looking through plans that were designed to evade the requirement to engage an independent qualified public accountant. Faced with the invitation, the DoL answer said that an administrator may treat plans as separate.

Many thanks to all