Audit for Terminated 401(k) Plan?

[Guest LCarter3]

Our 401(k) has always been defined as a large plan (a plan with over 100 participants at the beginning of the plan year; those participants being comprised of active employees whether participating in the plan or eligible but electing not to do so, retired or separated particpants with an account balance, and deceased participants with beneficiaries).

There have been no employer contributions for the past couple of years, only employee deferrals. We terminated our plan effective 12/01/2009, so there were no employee deferrals beyond that date. The plan continued to have asset balances into 2010, while participants submitted their paperwork for rollovers, etc. We did have an audit for 2009 (01/01/2009-11/30/2009).

QUESTION: Are we required to have an audit for 2010? The plan ceased to exist in 2009, so technically there were no eligible participants. Our TPA says yes to the audit; our auditors say no. With funds tight, not having to pay $10k for an audit would be beneficial. Would cover some payroll!

[12AX7]

How many participants were in the plan as of 12/01/09? I'm assuming you're inquiring about the plan year ending 11/30/10?

[BG5150]

Were there more than 100 account balances on 1/1/2010?

[Guest LCarter3]

No. Less than 100 account balances.

[Guest LCarter3]

How many participants were in the plan as of 12/01/09? I'm assuming you're inquiring about the plan year ending 11/30/10?

About 130.

[Guest LCarter3]

Were there more than 100 account balances on 1/1/2010?

No. Less than 100 account balances.

[12AX7]

I'm a little confused about the plan year. You said that there "was an audit for 2009 (01/01/2009-11/30/2009)." Perhaps I'm mistakenly assumed that there was a short plan year and that is why I questioned the plan year. Please clarify the plan year that you are concerned about e.g. 1/1/10 - 12/31/10.

[Guest Dell]

First, if this was a DC plan, why was the audit only through 11/30/09? If all assets were not transferred by that time it seems it would have run for the full year until 12/31/2009. Then you might not need an audit for 1/1/2010 through date all assets transferred out, if less than 100 participants on 1/1. 5500 would still be required though.

I believe the date of "termination" for audit purposes is the date assets are all distributed, not the effective date the trustees chose.

[austin3515]

I'm sure the auidoit covered a full 12 months. The confusion relates (presumably( to the fact that the plan was terminated effective 11/30/09, which does NOT create a shprt plan year (at least for 5500 reporting purposes).

So if a) you terminated the plan such that no one is eligbile to participate asof 11/30/2009 and b) less than 100 participants have account balances, then you do not need an audit. The employees who elected not to participate (and who terefore have no balances) are no longer considered participants in the plan folloowing the terminaiton date.

[Guest LCarter3]

I'm a little confused about the plan year. You said that there "was an audit for 2009 (01/01/2009-11/30/2009)." Perhaps I'm mistakenly assumed that there was a short plan year and that is why I questioned the plan year. Please clarify the plan year that you are concerned about e.g. 1/1/10 - 12/31/10.

My error/confusion in relaying info. An audit was completed the the plan year 01/01/2009-12/31/2009. The Auditor's Report states, "...the Plan has changed its basis of accounting from the ongoing plan basis to the liquidation basis for the period after December 1, 2009."

I am wondering if an audit needs to be performed for the plan year 01/01/2010-12/31/2010.

[ESOP Guy]

Then go back to BG's question and your answer.

How many people had a balance as of 1/1/2010? If <100 no audit, if >100 audit.

[Guest LCarter3]

THANKS, ALL OF YOU!