The New Year will be here before we know it. And so will changes to the way employers approach their employee benefit plan audit.
Back in April 2023, we shared an article with you on the U.S. Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation (PBGC) revisions to Form 5500, effective for employee benefit plan years beginning on or after January 1, 2023.
One of the more significant changes that we would like to specifically highlight is the way an employer determines whether their employee benefit plan requires an audit. Previously, the need for an employee benefit plan audit was determined by the number of eligible participants, even if they elected to not participate and did not have an account balance within the plan. Under the new counting methodology, only those plans with 100 participants or more who have account balances at the start of the plan year will require an employee benefit plan audit.
If your employee benefit plan falls below the threshold requiring an audit, it is still important to keep a vigilant eye on your plan in order to make sure it is in compliance with the plan document and the reporting agency requirements. When evaluating the plan’s operations, consider the impact the following circumstances may have on your plan:
- Definition of compensation
- Changes resulting from implementation of the Secure Act 2.0
- Changes in third-party administrators
- Changes in payroll providers
- Turnover within the payroll department
- Errors discovered in prior year audits that may still be a pervasive issue
While these new rules could present alternative, cost-saving options and ultimately eliminate the need for an audit altogether, every situation is unique. That’s where we can help. The employee benefit plan accounting experts at Ellin & Tucker can walk you through the nuances and determine what’s right for you and your business.