Tools / Audit threshold

Does this 401(k) plan need an audit?

One number decides it: participants holding an account balance on the first day of the plan year. Look the plan up and we will read that number off its own filing.

Half the prose on this subject still uses the pre-2023 counting rule and gets the answer wrong for plans with a lot of eligible employees who never enrolled.

Searching all Form 5500 and 5500-SF filings published by the Department of Labor, large plans and small. Search by your company name or by the plan name on your statement. The search runs in your browser, and the name you type is never sent anywhere. .

Questions people ask about this

Does my 401(k) plan need an audit?

It needs one if 100 or more participants held an account balance on the first day of the plan year. Below that it files as a small plan with no auditor's report. The one exception is the 80 to 120 rule, which lets a plan with a beginning count in that band keep filing in whichever category it used last year.

Is the audit threshold 100 participants with a balance, or 120?

It is 100 participants with an account balance. The 120 figure comes from the 80 to 120 rule, which is an election rather than a threshold. A plan that reaches 100 and filed as a small plan the year before may elect to keep filing small, which is why so many people remember the number as 120. Once the count passes 120 the election disappears and the audit is unavoidable.

Which participants count toward the 100?

Participants holding an account balance, counted on the first day of the plan year. Since the 2023 plan year this replaced the older count of everyone eligible to participate, so a company with 300 eligible employees and 80 balances is a small plan. Former employees who still hold a balance do count. There is one exception: a new plan measures on the count at the END of its first year instead. Anything written before 2023 that says otherwise is out of date.

What is the 80 to 120 rule?

If the participant count at the beginning of the plan year is between 80 and 120, and a return was filed for the prior year, the plan may file in the same category as that prior return. It runs in both directions: a plan that grew to 118 and filed small last year may stay small, and a plan that shrank to 85 after filing large may stay large.