Became Large Plan Filer 2014 wants to Terminate Plan

[Guest boltonch]

Plan has over 120 as of 1/1/2014 and will need an audit for the 2014 5500. First time as large plan filer.

If the trustee terminates the plan during 2014 would the audit still be required?

If an audit is still required, could they terminate the plan 9/30/2015 so all assets can be distributed by 12/31/2015 to allow them to put max deferral contributions in for 2014 and 2015 and then forgo the audit for 2014 and have both plan years audited and include the auditors report with the final 5500?

[Lou S.]

They need an audit for 2014 unless the plan distributes all assets by no later than 7/31/2015 in which case you could defer to 2015 PYE.

From Instructions to Form 5500 -

If the plan had a short plan year of seven (7) months or less for either the prior plan year or the plan year being reported on the 2013 Form 5500, an election can be made to defer filing the accountant’s report in accordance with 29 CFR 2520.104-50.

[Flyboyjohn]

And to be clear they will still need 2 audits (for full year 2014 and short year 2015) but will be able to delay the timing of the audits to occur simultaneously and be attached to the 2015 final 5500.

In our experience doing 2 audits at the same time doesn't materially reduce the fees (no "2 for 1" special deal) but perhaps your client can successfully negotiate a discount with their CPA. You might also recommend they put the plan audit enagagement out to bid and not blindly accept whatever the current CPA quotes.

[Andy the Actuary]

"You might also recommend they put the plan audit engagement out to bid and not blindly accept whatever the current CPA quotes."

Unless there are issues with the current CPA, my vote is not to switch. First, you'll have to issue some form of RFP and then go through a selection process. Not only do you have the turmoil created by bringing in someone new but you don't understand their audit practice. I.e., the new auditor might ask a lot of questions and require client homework whereas the existing auditor may be more or less a red stamp. Presumably, the present audit is painless.

[david rigby]

... but remember, the plan does not have a current auditor. Be sure to ask about the expertise of whatever auditor you may propose to engage.

[Andy the Actuary]

Understood this is the first plan audit but in all likelihood plan sponsor has corporate audit. So someone who debits and credits is already in place.

[Flyboyjohn]

The point I'm making is your regular debits and credits CPA may not have experience with qualified plan audits and accordingly may take the engagement out of a sense of loyalty or trying to protect his turf and might do a poor job or charge for a lot of learning time. I find too many companies don't appreciate the specialized nature of plan audits.