Amendment to avoid audit

[jmartin]

Plan has 120 participants, 95 of which have balances. We amend the plan effective 1/1/17 to exclude, by name, 30 non contributing participants. That gets the BOY Count to under 100 and therefore no audit.

Anyone see any issues?

Any issues with making another amendment later in the year, say February) making "all employees" eligible for the plan?

[jpod]

As to the first step, I see no issue concerning its effectiveness to avoid the audit requirement (although I suppose it could create potential minimum coverage problems.) As to the second step, why wait until February? Why not do it on January 2? That is tongue in cheek. It certainly should create an issue, but beyond that I won't comment because I can't spend the time required to analyze it.

[ETA Consulting LLC]

In this line of work, it's always a good idea to know where the lines are drawn. If you are currently a small plan filer AND you do not have MORE THAN 120 participants covered on day one, then you may still file on a small plan (and, therefore, have no audit).

Good Luck!

[david rigby]

Well, of course you already know that the participant count is the most visible, but not the only, parameter to determine whether an audit is required.

[My 2 cents]

Well, of course you already know that the participant count is the most visible, but not the only, parameter to determine whether an audit is required.

If the participant count is high enough, the sponsor must obtain an audit from an independent auditor. The process by which the IRS selects plans to audit is much more mysterious. I doubt that participant count is especially relevant when it comes time for the IRS to decide which plans will be audited by them, certainly not if the participant count is somewhere around 100.

While there may be situations where the 5500-SF cannot be used other than because of participant count (or where the sponsor cannot claim exemption from the audit requirement when filing the 5500-SF), I suspect that one cannot then avoid having to obtain an audit by tweaking the participant count if those situations apply.

[ESOP Guy]

Well, of course you already know that the participant count is the most visible, but not the only, parameter to determine whether an audit is required.

David isn't referring to an IRS audit but the fact even a plan with fewer then 100 participants can need an audit any more if its assets are the wrong kind of assets.

https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/faq_auditwaiver.pdf