When Does a Retirement Plan Need an Annual Audit?

In accordance with the Employee Retirement Income Security Act (ERISA), retirement accounts with more than 100 eligible participants at the start of the plan year are considered large retirement funds. These large retirement funds require that an annual audit of plan financial statements be conducted by an independent, qualified public accountant.

Form 5500

Under the U.S. tax code, employers that sponsor large retirement funds must file Form 5500 annually with the IRS. Form 5500 requires the business to prepare audited financial statements, including the retirement plan’s assets, the number of contributions made to the plan during the year, and the investment income the plan earned during the year. The auditor that prepares the statement is also required to disclose any federal compliance deficiencies regarding the administration of the plan.

80-120 Rule

All qualified retirement plans under ERISA must submit an annual report summarizing the plan’s overall financial condition. For plans with 99 or fewer eligible participants an audit by a public accountant isn’t necessary. Rather, the plan administrator will simply fill out a Form 5500-SF, or a Form 5500-EZ for one-participant plans. Because of this distinction, determining the plan size is important and is determined by the eligible participant count at the beginning of the plan year. However, there is an exception that may change how the size of your retirement plan is documented. Under the 80/120 rule, plans that filed as a small plan the previous year can file as a small plan again, even after exceeding 100 eligible participants. To be eligible for the 80/120 rule, the plan must have filed as a small plan the previous year, and must not exceed a participant count of 120.

Annual Audit Due Date

The annual audit due date for filing Form 5500 along with an attached audit is July 31st for all calendar year plans. In order to avoid penalties for failing to complete or filing late, retirement plan sponsors should take time in advance to understand the requirements of the annual audit well in advance of the deadline.

Will your company’s retirement plan need an annual audit?  If so, contact The Baird Audit Group today!  Our professional audit staff will guide you through your audit to ensure you have met all the regulations required and quality assurance has been met.  Give us a call at 706-855-9500 or fill out our online form HERE.