SECURE Act provides Audit Relief from the Department of Labor for Some Plans
Written by Jeremiah “JP” Perryman, QKA on April 10, 2024
One of the many ways that the SECURE Act has changed the Retirement Plan landscape is the change in how 401(k), and in some cases 403(b), large plan filers of the 5500 are determined effective for plan years beginning January 1, 2023. These are plans that would typically file their 5500 and be audited in the 2024 calendar year.
Large plans are required to file the full Form 5500 and be audited by an independent auditor, while small plans generally can file the Form 5500-SF (Short Form) and are exempt from the audit requirement.
Previously, a large plan was defined as a plan that had reached the 120-participant count threshold in a previous year, without dipping below the 80-participant count threshold in a year since hitting the 120-participant count threshold (this is known at the 80/120 rule). The participant count is determined on the first day of the plan year.
The SECURE Act changed this rule to define a large plan as one that has reached the 120-participant with a balance count threshold in a plan year beginning after January 1, 2023. Once a plan is determined to be a large plan, it does not become exempt from the large plan status until it dips below the 80 participants with a balance threshold. For many plans that have numerous eligible employees choosing not to participate, this provides relief from having to perform future audits despite having to do so in the past. This will save the plan sponsor from the work and costs that such audits entail.
If you think that this change in requirements may apply to your plan, please feel free to reach out to your Plan Analyst, who will be happy to discuss your situation.
JP Perryman, QKA
Jeremiah “JP” Perryman, QKA is the Compliance and Operations Manager at Benefits² Administrators. He has more than 15 years of experience working with qualified retirement plans.