two small plans merge mid year, when do they become a large plan filer?

[WCC]

A single employer maintains two calendar year plans to avoid the audit. On January 1, 2022 Plan A has 90 participants and Plan B has 90 participants and both plans are identical from a benefits standpoint. On July 1, 2022 Plan B will merge into Plan A (waiting until 1/1/2023 to merge is not an option due to other business reasons).

On July 1, 2022 Plan A will have 180 participants approximately. 

Is Plan A a large plan filer beginning on January 1, 2023? Or does the mid year merger have any impact on making them a large filer for 2022? I am being told they will require an audit for 2022 and can't figure out the reasoning why and the person telling me this can't provide any support for their reasoning. 

Thank you 

[Belgarath]

Yes, it will be a large plan as of 1/1/2023. And no, I can't see why you are being told there is an audit required for 2022, unless perhaps due to non-qualifying assets and the bonding/disclosure requirements for the small plan audit waiver aren't being satisfied? But if that were the case, presumably whoever is telling you this would be able to provide their reasoning?

 

P.S. - I'm assuming the Plan Year remains as calendar year after the merger.

[WCC]

Thanks. Both plans currently meet all requirements under DOL Reg. §2520.103-1(c) to receive the audit exception. 

[Bill Presson]

Belgarath is correct (of course), but the client needs to remember that every CPA firm starting an audit for 2023 is still going to need to get comfortable with their beginning balances, etc. They won't do an official audit, but they will spend a lot of time reviewing the 2022 (and likely prior) year's data.

[pmacduff]

I'm with Bill.  Any plan I've ever had over the years that went from small plan to large plan, the auditors required all of the information from that prior year even though they were auditing the current year.

[bzorc]

Our firm looks at the current year and the past 2 years, when a small plan becomes a large plan.

[RatherBeGolfing]

4 minutes ago, bzorc said:

Our firm looks at the current year and the past 2 years, when a small plan becomes a large plan.

2 years is the minimum under AICPA auditing standards isn't it?  I have seen plenty of 3 year requests as well...