Meadows Urquhart Acree and Cook, LLP

  • Our Services
  • About Us
    • Meet Our Team
  • Our Culture
    • CPA & Accounting Careers
  • News & Resources
    • Cash Flow Resources
  • Contact Us
  • For Clients
    • Pay My Invoice
    • Send A File
    • SafeSend Returns
    • Previous Portal
    • FAQs
You are here: Home / News & Resources / 401K Plans- The Good, The Bad and the Compliance

05/25/2017 by Michael (Mike) Edwards, CPA

401K Plans- The Good, The Bad and the Compliance

401K PlanTo remain competitive in the market place, many companies will offer a 401K plan for their employees. Good for you! Of course, now you are saddled with managing the plan’s day to day activities and having to address the multitude of and ever changing regulatory requirements. One of these requirements is the potential need for a plan audit.

Large vs Small Plans

An audit is required for “large” plans but not “small” plans. Knowing the difference and your options is key. A small plan is defined as having less than 100 eligible participants and a large plan is defined as having 100 or more eligible participants.  Pretty simple, right? Yes and no. The definition of eligible participants is important here. An individual may be eligible but not participating i.e. you may have a total of 75 people in your plan at the end of the year but there could be 80 more that could participate but have elected not to. The result would be 155 eligible participants and the requirement for an audit. Folks may have worked with you long enough and are old enough to join the plan but may forgo participation for a variety of personal reasons. Maybe they are already independently wealthy, maybe their spouse handles the retirement “stuff” or maybe they just need a jet ski; regardless of the reason some employees just don’t participate even though they can.

The 80-120 Participant Rule

There is an exception to the audit requirement for large plans called the “80-120 participant” rule. The idea here is that if your plan has less than 120 eligible participants at the beginning of the current plan year you can elect to be treated as you were in the previous year (as a small plan) and thus avoid an audit. This can continue until the year your plan has 120 or more eligible participants on day one of the plan year. At that point though, it’s audit time.

There is a lot of information to take in above but it’s important information to be aware of and understand. It will help ensure you are compliant with regulatory requirements while being conscientious about potential dollars spent.

Important Deadlines

Knowing the due dates is always helpful. If needed, your audit is included with the filing of your Form 5500.  A Form 5500 is the tax form associated with your 401K plan that is due July 31st (or the next business day if the 31st falls on a weekend or federal holiday). You can choose to file an extension (Form 5558) by July 31st that will postpone the deadline for Form 5500 until October 15th (or the next business day if the 15th falls on a weekend or federal holiday).*

What to Look for in an Audit Firm

When the time comes to need an audit, be sure to select an audit firm with specific 401K and other employee benefit experience. These audits are unique and highly regulated thus having a firm that can not only detect errors but can identify the risk of potential issues before they happen should be the value you seek from your audit provider. Do your due diligence during your auditor selection process. Ask questions like:

  • How many 401K audits does your firm perform?
  • Is your firm a member of the AICPA Employee Benefit Plan Audit Quality Center
  • Do firm members participate in employee benefit plan specific training?

Fun stuff, no doubt, but important to you ensuring your plan is a benefit that your employees and other participants can believe in and trust.

* These dates assume a plan on a calendar year end.

Filed Under: News & Resources

mm

About Michael (Mike) Edwards, CPA

Mike is a Partner at Meadows Urquhart. He specializes in providing audit and other assurance type engagements ranging from traditional financial statement audits to financial contract audits with public and private for-profit companies, as well as nonprofits and governmental entities. More about Mike.

We're Hiring!
We're looking for exceptionally motivated professionals to join our fast-growing team. Apply Now!

DID YOU KNOW …

Not only does Meadows Urquhart provide accounting and tax services, but we’re also forward-thinking CPAs & consultants who take the time to step into our clients' shoes. We offer services for businesses, high-net-worth individuals, nonprofits and hedge funds.

Find out more about our services.

In Your Shoes

We're proud to be a part of this client's success story. Click on the shoes to learn more.
Dominion Voice & Data
Dominion Voice & Data


Meadows Urquhart is a CPA & accounting firm located in Richmond, VA.

Our Location

1802 Bayberry Court, Suite 102
Richmond, Virginia 23226
Phone: 804-249-5786
Fax: 804-249-5781
Contact Us

AGN International member

Follows Us

  • Email
  • Facebook
  • LinkedIn
Certified QuickBooks Pro Advisor Bill.com Expert Certified Certified QuickBooks  OnlinePro Advisor

Get Our Newsletter

Copyright © 2023 Meadows Urquhart Acree & Cook, LLP • All Rights Reserved

Home • About • Contact • Services

A Kinetic Website