A 401k audit is an independent review of a company’s retirement plan to ensure it follows IRS and Department of Labor rules. Understanding 401k-audit-requirements is essential for employers to stay compliant and avoid penalties.
When Are 401k Audit Requirements Applied?
A 401k audit is required when a retirement plan has 100 or more participants with account balances at the beginning of the plan year. This count includes:
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Active employees
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Former employees who still have money in the plan
If a plan has fewer than 100 participants with balances, it may qualify as a small plan and avoid the audit requirement.
The 80–120 Participant Rule
Under the 401k-audit-requirements, plans with 80 to 120 participants may continue filing as a small plan if they did so in the previous year. This rule helps growing businesses delay audit requirements until they exceed 120 participants.
What Does a 401k Audit Include?
During a 401k audit, an independent CPA reviews:
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Employee and employer contributions
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Participant balances and distributions
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Loans and hardship withdrawals
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Compliance with plan documents and federal regulations
The audit ensures all financial information reported on Form 5500 is accurate and complete.
Why 401k Audit Requirements Are Important
Following 401k-audit-requirements helps:
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Protect employee retirement assets
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Ensure accurate plan reporting
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Reduce the risk of IRS or DOL penalties
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Maintain trust and transparency within the organization
Deadlines to Remember
Most calendar-year plans must complete the audit and file Form 5500 by July 31 of the following year. An extension may be available if more time is needed.
Final Thoughts
Understanding and meeting 401k audit requirements is critical for any employer offering a retirement plan. Proper planning, accurate recordkeeping, and working with experienced professionals can make the audit process smooth and stress-free.
:
https://tosinowocpa.com/401k-audit/
