Art of the Qualified Plan Audit

The New Mandatory Roth Catch-Up Rules Section 603 of the Setting Every Community Up for Retirement Enhancement Act 2.0 (SECURE Act 2.0) added Internal Revenue Code (IRC) Section 404(v)(7) to require catch-up eligible High Earners to make catch-up contributions to their 401(k), 403(b), and 457(b) plans on a Roth basis, effective January 1, 2026. However, … Continued

In Summary The 80-120 Rule for Audit Requirement: A retirement plan’s need for an annual audit is determined by counting participants with account balances on the first day of the plan year. The “80-120 rule” is an exception that allows a plan with 80 to 120 participants to file as a small plan (no audit) … Continued

Posted by Christopher J. Ciminera, CPA IKYMI: It’s with great pleasure that we congratulate Maria Hurd, CPA, RPA, our fearless employee benefit plan practice group leader and the guiding star for myself, Stacey Snyder, Saaib Uppal, Tyler Starr, and many others, for being recognized on Forbes’ List of America’s Best-in-State CPAs. This list is a … Continued

In Summary Unclear deadlines for 401(k) deferrals: The Department of Labor (DOL) regulations for 401(k) deferral deposits are unclear, using “earliest” and “reasonably” rather than a firm deadline. While small plans (under 100 accounts) have a 7-day safe harbor, large plans do not. As a result, many large plans adopt a 3-day industry standard, which … Continued

In Summary Foundational Plan Governance: Auditors will require all core legal and governance materials, such as the executed plan document, the most recent IRS determination letter, committee minutes, proof of the ERISA fidelity bond, and copies of all service provider agreements. Financial Reporting: The audit relies on detailed financial data, including the draft Form 5500, year-end … 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 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 A Year of Service Is Negotiable, Not Literal: A “Year-of-Service” in retirement plans often does not equal 12 months, as employers can choose from various counting methods (Actual Hours, Elapsed Time, Equivalency) to define eligibility and vesting, essentially making a year “whatever the employer needs it to be.” Counting Methods: Different methods offer trade-offs; … Continued

In Summary Understanding and Reporting Late 401(k) Deposits: Late deposits of employee 401(k) contributions violate ERISA and are considered prohibited transactions; they must be reported on the Form 5500 (Schedule H for large plans, Line 10a for small plans filing 5500-SF). Two Paths to Correction Exist: Employers can rectify late deposits through self-correction, which requires … Continued

In Summary Differences in Distribution Reporting: There are inconsistencies between Generally Accepted Accounting Principles (GAAP) and Form 5500 instructions, particularly concerning benefit distributions. Form 5500, Schedule H includes benefits payable (approved but unpaid claims) as a liability, while accrual basis GAAP financial statements generally report distributions when paid, aligning with Forms 1099-R. Treatment of Corrective … Continued