Employee Benefit Plans – When is an audit required?

Most employers are expected to offer an employee benefit plan.  Although benefit plans can be a means for attracting and retaining quality employees, there are many challenges to offering such plans.
The most challenging aspects of an employee benefit plan come to interpreting the plan document.  Ensure that your organization reviews the plan yearly and that the person in charge of administering the plan is trained.  Ultimately it is the employer’s responsibility to keep the plan in compliance with applicable laws but helpful resources such as a third party administrator and a CPA can offer peace of mind.

Begin by counting the participants in your plan. 

4 keys to counting participants:

• Use the first day of the plan year, not the last day of the previous plan year (Count must include those who became eligible on the 1st day of the plan year).
• Include all employees who have met the plan’s eligibility requirements, taking into account entry dates.
• Include participants who are eligible but not contributing.
• Include all terminated employees who have account balances under the plan.

An employee benefit plan audit is required when a plan has 100 or more participants on the 1st day of the plan year.  It is also required if 6% or more of the Plan’s assets are invested in a real estate limited partnership that is self-trusteed. 

An employee benefit plan audit is NOT required when applying the 80/120 Exception.  A plan with no less than 80 but no more than 120 participants at the beginning of the plan year that filed a Form 5500 for the previous plan year may elect to file the same type (i.e. small plan or large plan) of Form 5500 it filed the previous year.  Any plan filing an annual report under this exception need not engage an auditor nor file detailed financial statements.


For further compliance assistance regarding Employee Benefit Plans, visit the Department of Labor website or contact a member of the Bergan Paulsen team. 

Bergan Paulsen is a member of the American Institute of CPAs’ Employee Benefit Plan Audit Quality Center. The center is a voluntary membership organization established to promote the quality of employee benefit plan audits.