DC Plan Audit Reqm't

[RestAssured]

All of my clients have less than 50 employees, so the idea of an audit is not something I'm too familiar with. But I will be pitching my services to a new client soon (will be a takeover plan for me), and they have about 144 employees, 81 of whom are active (401(k) with match only, so if someone doesn't make deferral, they have $0 balance).

Does someone have a checklist or yes/no flowchart they would share with me about determining whether or not an audit is necessary?  I've started my own, and compiled 6 pages of my own typed notes, and I now feel like I may be over-complicating the matter.  Reinventing the wheel, as it were.  I started with "5500 vs 5500SF", and gone through Sch H & I of the 5500 further down in my flow chart.  

I appreciate any direction you can give - but please dumb it down 🤯  Thank you!

[ratherbereading]

I don't think you need 6 pages 🙂. After 1/1/2023, audits are generally required for plans with more than 100 participants with account balances on the first day of the plan year. The 80/120 rule still applies. Same concept as before, just now applies to number of account balances at the beginning of the plan year. https://www.dol.gov/agencies/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/changes-for-the-2023-form-5500-and-form-5500-sf-annual-return-reports?trk=article-ssr-frontend-pulse_little-text-block

[RestAssured]

Well, the 6 pages of notes is because I'm an over-thinker. 😂  Probably.....  lol

My confusion NOW comes from the actual IRS Form 5500 & 5500SF instructions!  On Page 1 (sf), there is a note about the change in counting method.  Awesome.  But then on page 11 (SF instructions) on the right hand side under "for pension benefit plans"... it says about "participants":

(formatting is my doing)  "This includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under the plan."

Am I reading this wrong?  Doesn't Page 11 mean I would include actively-employed participants with a zero balance by virtue of their not having made a 401(k) deferral and thus not receiving a SH Match??  That contradicts what Page 1 says, and what you and others have stated.

Thanks for the discussion!  Feel free to correct me, I'm not above being wrong!  (Don't tell my husband)

[Bill Presson]

4 hours ago, RestAssured said:

Well, the 6 pages of notes is because I'm an over-thinker. 😂  Probably.....  lol

My confusion NOW comes from the actual IRS Form 5500 & 5500SF instructions!  On Page 1 (sf), there is a note about the change in counting method.  Awesome.  But then on page 11 (SF instructions) on the right hand side under "for pension benefit plans"... it says about "participants":

(formatting is my doing)  "This includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under the plan."

Am I reading this wrong?  Doesn't Page 11 mean I would include actively-employed participants with a zero balance by virtue of their not having made a 401(k) deferral and thus not receiving a SH Match??  That contradicts what Page 1 says, and what you and others have stated.

Thanks for the discussion!  Feel free to correct me, I'm not above being wrong!  (Don't tell my husband)

You're reading the instructions correctly for the line. But, it's the number on line 5c(1) that determines whether you need an audit or not.

[RestAssured]

Thanks Bill and RatherBeReading.