Form 5500 Audit Count - With A Twist

So the new participant count methodology for purposes of the audit waiver is participants with a balance at the beginning of the year, with an exception for new plans which use participants with a balance at the end of the year.

I'm looking at a 5500 for a PEP with the following facts:

• Plan was effective 9/1/22
• Plan filed a first return for the PY ending 12/31/22.
• Plan had 9 Participants with a balance at 1/1/23
• A new employer became an adopter of the PEP 1/1/23
• The new employer ends up with 160 participants with a balance at 12/31/23

This seems pretty straightforward to me.  Its not a new plan and there were only 9 participants with a balance as at the beginning of the year, no audit is required for 2023.  With 160+ participants with a balance as of 1/1/24, the plan will need an audit in 2024.

I'm getting disagreeing opinions on the audit requirement for 2023.  The argument is that because the new adopting employer ended had 160 participants with a balance as of 12/31/23, they also count towards the beginning participants with a balance count, which then is over the audit threshold. 

Anyone disagree with me that the plan does NOT need an audit for 2023?  The fact that its a PEP shouldn't change things here since its one plan and one 5500...

Thanks!

I agree.

5 hours ago, Belgarath said:

I agree.

Thanks @Belgarath!

But remember, my opinion and 8 dollars will get you a cup of coffee.😁 Happy Friday!

1 hour ago, Belgarath said:

But remember, my opinion and 8 dollars will get you a cup of coffee.😁 Happy Friday!

HA! We may need an inflation adjustment on that 8 dollars... Happy Friday!