The requirement to file audited financial statements along with your benefit plan’s Form 5500 depends on whether your plan is considered a large plan filer or a small plan filer, which is determined by the number of participants in your plan at the beginning of the plan year. Participants in your plan include the following:
- All employees that have met the eligibility requirements of the plan, even those that choose to not participate; and
- Any terminated participants (retired, separated, deceased) that still have account balances.
In general, plans with over 100 participants at the beginning of the plan year are considered large plan filers and are required to file a Form 5500 annually with the U.S Department of Labor (DOL) with audited financial statements for the plan attached. Plans with under 100 participants at the beginning of the plan year are considered small plan filers and can instead file the Form 5500-SF (Short Form), which requires significantly less plan information and does not require audited financial statements to be attached with the filing.
However, due to frequent fluctuation between slightly more or less than 100 participants, the DOL has an “80/120 rule”. This rule allows a plan with greater than 80 participants, but less than 120 participants, at the beginning of the current plan year to use the same form as the previous year. The table below illustrates the circumstances in which the plan would file under each category.
The 80-120 participant rule may allow some plans that would otherwise be required to follow the arduous large plan filing requirements for Form 5500 to, instead, continue to file under the streamlined Form 5500-SF process. It is also important that you understand the 80/120 rule to ensure you accurately file with the DOL and avoid potential fines and sanctions.
Benjamin A. Sumner, CPA, is an audit partner with over nine years of experience providing auditing, accounting and consulting services to a wide variety of privately-held businesses. For more information on this topic, you can contact Ben at (315) 472-9127 or firstname.lastname@example.org. To learn more about Dannible & McKee, visit www.dmcpas.com.