Art of the Qualified Plan Audit

In Summary Final Form 5500 Filing, Asset Distribution, and Legal Title: A plan’s Final Form 5500 filing obligation is triggered not by the effective date of termination, but by the complete distribution of all assets. In a merger, the final filing is determined by the date the legal title of the assets transfers to the … Continued

In Summary Funded Plans, the Audit Requirement: The single most important factor determining if a large welfare plan needs a CPA audit is its funding status. If a plan uses a separate trust account (such as a 501(c)(9) VEBA) to hold assets or pay benefits—making it “funded”—it must undergo an audit of the entire plan … Continued

In Summary Deficient Filings vs. Delinquent Filings: During the AICPA conference, the DOL’s Marcus Aron clarified that the department strongly prefers a “deficient” filing (filed on time but incomplete, such as missing an audit) over a “delinquent” filing (not filed at all). A deficient filing can be amended later to include the audit report and … Continued

In Summary New Comparability Plans, a Flexible Tool for Business Owners: These are qualified profit-sharing plans that allow employers to divide employees into different groups, or “classes,” to provide different contribution percentages to each. This design is specifically intended to maximize the contributions going to older, higher-paid owners and key employees while providing a more modest, … Continued

In Summary SECURE 2.0 Expands Coverage: The SECURE 2.0 Act’s Long-Term Part-Time (LTPT) rules, effective for 403(b) plans as of January 1, 2023, require employers to permit employees to make elective deferrals if they work 500-999 hours annually for two consecutive years (starting with the 2023 plan year) and have reached age 21. Impact on … Continued

In Summary Audit Threshold Change: There was a 2023 change to the Form 5500 participant count rule, which now excludes eligible participants who do not have an account balance on the first day of the plan year from the audit-triggering count. Timing Discrepancies: Various scenarios—including plan mergers, trade date vs. settlement date differences, and spinoffs—create … Continued

In Summary The 403(b) Audit Disclaimer’s Origin: The requirement for ERISA-covered 403(b) plans to have audited financial statements began in 2009, but due to a historical lack of employer involvement with older contracts, plan sponsors often could not locate all plan assets. This impossibility led to auditors issuing disclaimed opinions on the financial statements’ completeness. … Continued

Don’t Stand, Don’t Stand So, Don’t Stand So Close to Me Unlike unwritten rules referring to the social norms, customs, and expectations that guide behavior in various contexts, such as maximizing personal space in an elevator, or bringing a small gift when invited to someone’s house, SECURE 2.0 brings rules that must be followed effective … Continued

In Summary Change in Participant Counting Method: Defined contribution plans filing the 2023 Form 5500 must now use the number of participants with account balances at the beginning of the plan year to determine their filing status (small-plan, under 100, or large-plan, 100 or more), a shift from the prior rule that counted all eligible … Continued

In Summary ADP/ACP Testing Limits HCEs: Discrimination tests like ADP and ACP limit how much Highly Compensated Employees (HCEs) can defer to a plan. HCE deferral limits are directly tied to the average contribution percentage of Non-Highly Compensated Employees (NHCEs). Zero Contributions Impact Averages: All eligible employees, even those who contribute zero, must be included … Continued