New Plan - Participant Count for Form 5500

[AdKu]

The participant count for a newly established plan at the beginning of the year was 119.

The independent auditor who was hired to perform the financial statement audit for the plan insisted that this new plan must file as a small plan and doesn't need audit.

My understanding is that the 80/120 rule is not applicable to a new plan if the the number of participants is over 99 for the 1st year of the plan.

The 2014 Edition ERISA Outline Book page 13A.76 states:

"Must have at least one year where participant count is below 100. This exception is not applicable to a new plan which starts with a participant count above 99. A plan must have at least one year with a participant count below 100, where it is eligible to file as a small plan filer, before it can use this exception when the participant count rises above 99."

[Belgarath]

I agree with you. Refer the auditor to 2520.103-1(d) - which specifies the exception based upon the "previous plan year" filing. Then ask the auditor to provide a citation of some guidance which supports the auditor's position. Maybe there is something we don't know about.

Now, I have to say that IMHO, it is absurd to allow an existing plan to go up to 120 with no audit requirement, just because they were previously a small plan, while not allowing a new plan to take advantage of a similar dispensation, but I don't make the rules...

Maybe when I'm elected as dictator, I can fix some of this.

[RatherBeGolfing]

The independent auditor who was hired to perform the financial statement audit for the plan insisted that this new plan must file as a small plan and doesn't need audit.

You are absolutely correct, you cannot rely on the 80-120 rule for a first year plan because the rule allows you to CONTINUE to file as a small plan.

It may be time to reconsider the "auditor" in this case...

[NJ Mike]

Are dictators elected?

[ESOP Guy]

The participant count for a newly established plan at the beginning of the year was 119.

The independent auditor who was hired to perform the financial statement audit for the plan insisted that this new plan must file as a small plan and doesn't need audit.

the odd part is even if the 80/120 rule did apply (which to be clear I agree it doesn't) the rule isn't mandatory.

If you have under 100 participants in the past you can wait until you reach 120 before you are required to get an audit There is nothing stopping you from getting the audit as 101 participants. (I guess there is nothing stopping you from getting an audit at 50).

Most people just don't want to spend the money for an audit if it isn't required but you aren't required to file as a small plan even under the rule.

[RatherBeGolfing]

Are dictators elected?

Great, now I have to wipe coffee off my monitor...

[GMK]

Are dictators elected?

It happens.

[jpod]

Even though he/she is wrong, kudos to the auditor for trying to save you money.

[My 2 cents]

Even though he/she is wrong, kudos to the auditor for trying to save you money.

If they are actually required to file a 5500 instead of a 5500-SF but file a 5500-SF, how long does that money stay saved?

And is this auditor charging anything for NOT providing an auditor's report?

[jpod]

Relax. It was a little bit tongue in cheek.

[BG5150]

If the plan goes under 80, it MUST file as a small plan (either 5500-SF, or 5500 with Sched I) regardless of what was filed the previous year.. They can get it audited if they want, though.

[Bill Presson]

If the plan goes under 80, it MUST file as a small plan (either 5500-SF, or 5500 with Sched I) regardless of what was filed the previous year.. They can get it audited if they want, though.

Actually had a plan sponsor do this for a few years. I kept telling them it wasn't required but it wasn't until the third year that my words actually hit home that they were spending $10k they didn't need to spend.