Meeting 401k audit requirements can become complicated during mergers and acquisitions (M&A). In addition to handling the schematics of a merger, plan sponsors must also follow strict retirement plan audit procedures to stay compliant with ERISA.

We’ll explain the key steps you must follow to help you avoid filing audit extensions and facing uncertainties after a planned merger.


The Complex Landscape of M&A and 401k Plans

When companies merge, they often face challenging decisions regarding how to manage their respective 401k plans. There are three distinct paths a company can take to manage their separate 401k plans after a merger:

  1. Terminate the existing 401(k) plan.
  2. Operate it alongside the new parent company’s plan.
  3. Merge the two retirement plans into one plan.

Each option comes with hurdles and requirements, particularly concerning compliance and audits. When selecting to terminate or merge 401k plans, understanding 401k audit requirements becomes crucial, as does ensuring that any action taken doesn’t jeopardize the plan’s compliance with ERISA.


Navigating 401k Audit Requirements

What 401k plan audit requirements are necessary after the termination or merger of a sponsored plan? That depends on the plan’s size and the number of eligible participants. 


Large Plans

According to the updated DOL 401k audit requirements, a merged retirement benefit plan with at least 100 participants with active accounts is considered a “large plan” and must submit a Form 5500. This filing would include audited financial statements for both plans if they were active during the same operating year.

Failure to meet these requirements can result in penalties and fines, which can significantly impact a company’s financial health.


Small Plans

Merged plans with less than 100 participants are classified as small plans and do not have to file Form 5500. However, they must still follow ERISA’s reporting requirements, such as providing summary annual reports (SARs) to all eligible participants.


The Final Form 5500: Timing is Everything

There’s often confusion about when a merged or terminated plan will need to file Form 5500. It’s essential to know that Form 5500 must be submitted by the end of the seventh month after all assets from the original plan are fully divested.


What does this mean in practice?

Once the plan reaches $0, the clock starts ticking for filing the final Form 5500 and planning a benefit plan audit. Documents must accurately reflect that all assets have been distributed and that the plan shows a zero balance of ending assets. Stay on top of these deadlines to ensure all documents are filed correctly and timely.


What if you miss your Form 5500 deadline?

Extensions are available to provide an additional 2.5 months for submission of a Form 5500 audit. However, it’s better to avoid needing an extension by staying organized and compliant throughout the merger process.


Partnering with an Experienced Audit Team

Mergers and acquisitions can complicate 401k plan management and compliance. That’s why it’s essential to work with a CPA firm that you can trust and has experience with the challenges faced by plan sponsors.

At Assurance Dimensions, we have a dedicated team of experts who specialize in benefit plan audits.  We’re here to guide you through every step, ensuring your company remains compliant and your employees’ futures are secure. 

If you’re navigating a merger or considering one, let’s discuss how we can support your journey and ensure your retirement plans meet all necessary 401k audit requirements. Contact us today for a quote.