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Who's the Employer?

Question 277: I am interested in the audit aspect of a multiple employer plan. In my situation there are several small employer plans aggregated into a multiple employer plan. Individually none of the plans would meet the audit requirement; but as a multiple employer plan there are over 100 participants, so the plan files Schedule H to Form 5500. Small employers should weigh in the audit cost associated with the multiple employer plan in considering administrative costs. Answer: Is there a question that goes with that answer? You are correct that a multiple employer plan is a single 414(l) plan. As such, it files one 5500. When the plan answers question 6 (number of participants at the start of the year), that answer applies to the plan as a whole. That question and answer determines whether the plan is a large plan-- which must file Schedule H and have an audit-- or a small plan-- which can file Schedule I and generally avoid an audit. A multiple employer plan always involves trade-offs. There is additional complexity and risk associated with a multiple employer design. Increased audit potential is part of that complexity. On the other hand there are savings from having a larger pool of money to invest, a single 5500 to file, and a single document to maintain. Each employer must weigh these factors as they apply to its particular situation.

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