Generally speaking, plans with fewer than 100 participants qualify as small plans, and do not require an independent third party audit. It is important to note that if your plan is subject to an independent audit, the auditor’s report must be filed with the Form 5500.
For new plans, it’s pretty straightforward. If there are fewer than 100 employees on the first day or the plan year, it qualifies as a small plan. If there are more than 100 employees on the first day of the plan year, the plan qualifies as a large plan, and is subject to an audit. The exception is for new plans with over 100 participants whose upcoming plan year is seven months or shorter. In this case, they don’t have to file an audit report with their Form 5500 until the following year.
For existing plans that have been filing as a small plan, the cutoff is raised from 100 to 120 employees on the first day of the plan year. They can continue to file as a small plan until there are 120 or more employees on the first day of the plan year.
