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Does Your 401(k) Plan Need an Audit?

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What Plan Sponsors Need to Know

As your organization grows, your 401(k) plan may eventually become subject to an annual audit requirement. Determining when an audit is required isn't always as simple as counting the number of employees on your payroll.

For CFOs, owners, and HR leaders, understanding the rules before your plan crosses the threshold can help you avoid last-minute surprises and give your team time to prepare.

When Is a 401(k) Audit Generally Needed?

In general, a 401(k) plan is considered a large plan for Form 5500 purposes when it has 100 or more participants with account balances at the beginning of the plan year. This requirement does not necessarily mean 100 current employees.  Participants with account balances include employees participating in the plan, former employees who still have money in the plan, and others who have account balances in the plan.

For a new plan, the participant count is generally based on participants with account balances at the end of the year instead.

What Is the 80-120 Rule?

The 80-120 rule can help avoid an unexpected transition that requires an audit. If your plan was treated as a small plan last year and your count at the beginning of this year falls between 80 and 120, you may generally continue filing as a small plan (with no audit) until the participant count exceeds 120 participants with account balances. This rule often delays the first required audit.

What Should You Do If You’re Getting Close?

A little planning can make the first audit much easier.  Consider these steps:

  • Confirm your participant count with your TPA or recordkeeper.
  • Determine whether the 80–120 rule applies to your plan.
  • Identify your Form 5500 deadline. For calendar-year plans, the initial deadline is generally July 31st, with an extension typically available through October 15th.
  • Start planning early if an audit will be required. Your TPA, recordkeeper, internal team, and auditor will need to coordinate information and timing.

How Can AHP Help?

If your plan is approaching the audit threshold, AHP can help you understand what to expect and when to act. We can help confirm your audit requirements, understand your timeline, coordinate with your TPA, and prepare your team for a smooth first-year audit.

Reach out to AHP for a quick plan review so you can plan ahead with confidence.