Form 5500 Audit

[preErisa]

An accounting firm has advised a client whose plan count has dropped below 100 that the audit needs to continue nonetheless. Barring any circumstances other than simply the participant count, does anyone know if that is true?

[KMG77]

If the plan had 100 participants on the first day of the plan year (outside of the 80/120 rule) and they dropped below 100 on another day in the plan year, they still have to have an audit. The ppt count is measured on the first day of the plan year.

[preErisa]

The Participant count as of the first day of the Plan Year was less than 100.

[WDIK]

Could there be nonqualifying assets that are not properly bonded?

[preErisa]

Yes, we'll confirm that with the client but barring non-qualifying assets, can the audit be skipped?

[Tom Poje]

no matter what anyone says, you should follow the instructions indicated on the 5500.

you did not really indicate when the plan dropped below 100 participants, so it is hard to answer the question properly.

instructions (page 7 for form 5500):

a plan that covered fewer than 100 participants as of the beginning of the year should be completed following the requirements for a small plan, and a return filed for a plan that covered more than 100 participants as of the beginning of the year should be completed following the requiremenst for a large plan.

use the number of participants required to be entered on line 5 of the form 5500 to determine whether a plan is a "small plan" or a "large plan"

Note how the instructions say # of participants at the beginning of the year, not at some other point in time during the year.

the only exception given is that if you are between 80 and 120 particpants as of he beginning of the year AND a Form 5500 was filed the year before (hint: its not a new plan) you are permitted to file the same type of form you filed the year before. In other words, if you filed a short form the year before, you can file a short form again.

your comments implied a large plan form was filed the year before so the exception would not apply.

can not tell from your comments if the count as of the beginning of the year was less than 100. If it is more than 100, you are out of luck despite the fact that at the end of the year it is less than 100.