An HR team manager reviewing documents with her team related to the retirement plan audit


The Department of Labor (DOL), Pension Benefit Guaranty Corporation (PBGC), and the Internal Revenue Service (IRS) require companies to perform an annual retirement plan audit to file with Form 5500. These audits must be performed by third-party independent auditors, such as our team at Assurance Dimensions, to ensure employee benefit plans are ERISA compliant. 

Our jobs as auditors are to take note of your company’s procedures and practices to ensure you follow plan compliance, fiduciary responsibility, and internal controls. We will provide you with the tell-tale signs to search for to determine if your company needs a retirement plan audit.


Retirement Plans

There are two types of retirement plans that companies may offer to their employees: defined benefit plans and defined contribution plans. 

  • Defined benefit plan: A defined benefit plan promises employees a certain amount of income upon retirement based on different formulas to calculate the pension. 
  • Defined contribution plan: A defined contribution plan makes guaranteed plan contributions, but the retirement income amount is not guaranteed.  

Some plan examples include 401(k)s, profit-sharing, and employee stock ownership plans. Employers and employees contribute to these two types of retirement plans.


Does Your Company Need a Retirement Plan Audit?

It’s not always clear if your company requires an audit to stay compliant. So, how do you know if your company needs a Form 5500 audit?

The number of eligible plan participants will factor into determining if you need an audit. The DOL states that if a plan has or exceeds 100 eligible participants at the beginning of the plan year, then a retirement plan audit is needed. 

Who is an eligible participant? 

Eligible participants include:

  • An employee that has satisfied your Plan’s eligibility requirements.
  • Employees currently participating in the Company retirement plan.
  • A retired employee who is now receiving or can receive 401(k) benefits.
  • A separated employee who is currently receiving or can receive 401(k) benefits.
  • Deceased employees with beneficiaries who currently receive or can receive 401(k) benefits.


Large and Small Benefit Plans

The key difference between “large” and “small” benefit plans is the number of eligible participants. 

  • Large vs. small: The DOL states a large plan generally has 100 or more participants, while a small plan generally has fewer than 100 participants at the beginning of the plan year. 
  • Filing differences: Companies with a large plan must file Form 5500 with Schedule H, while companies with a small plan must file Form 5500 with Schedule I with the IRS. 
  • Audit requirement for large plans: Companies with a large plan must hire independent auditor services to complete an audit. Auditors will prepare a report stating an opinion on the company’s financial statements and benefit plans that must be included in the filing. 
  • Audit exception: The 80/120 rule provides an exception for large plans. 


The 80/120 rule

If a company filed as a small plan in the prior year and has a number of 120 participants or less at the beginning of the plan year, then under the 80/120 participant rule, companies can file in the same small plan category as the prior year. 

Updates to the 80/120 Rule

On February 23, 2023, the DOL issued a final rule on changes to filing Form 5500. The 100-participant threshold remains in place to differentiate between large and small plans; however, eligible participants must have account balances at the beginning of the plan year to determine if a retirement plan audit is required for the plan year.


Be Prepared and Stay Compliant 

If your company has experienced growth at the beginning of the plan year, then you probably have a higher amount of eligible participants for your retirement benefit plan. At Assurance Dimensions, we work with businesses ranging from 100 to over 10,000 employees. As a result, you can confidently rely on our experienced audit team, knowing we complete hundreds of these benefit plan audits annually.

Contact us today to help your organization ensure its benefit plans meet ERISA audit requirements.