Blue Ridge ESOP Associates Industry News

Form 5500 – Small Plan Audit Waiver

Posted by Kim M. Thompson

Jun 18, 2019, 2:30:00 PM

Small AuditThe U.S. Department of Labor (DOL) requires qualified retirement plans to have an annual audit by an independent qualified public accountant. The findings of the audit should be reported on the plan’s Form 5500. However, your plan may be eligible for the “small plan audit waiver” if it meets the below outlined requirements. 

What Plans Are Considered “Small Plans”?

Your plan must file as a “small plan” in order to claim the “small plan audit waiver”. According to the DOL, a plan is eligible to file as a small plan if one of the following applies:

1. The plan covers fewer than 100 participants at the beginning of the plan year.

2. The plan covers between 80 and 120 participants at the beginning of the plan year, filed as a small plan in the prior year, and elects to continue filing as a small plan.

What Conditions Must Be Met to Claim The Audit Waiver?

In addition to filing as a small plan, your plan must meet the following conditions to claim the audit waiver:

1. At least 95% of the plan’s assets must be “qualifying plan assets” or, any person who handles the assets not considered “qualifying” must be bonded.

A “qualifying plan asset” is:

* Any asset held by certain regulated financial institutions including banks, trust companies, insurances companies, broker-dealers, investment companies, and any other organization authorized to act as a trustee for individual retirement accounts

* Qualifying employer securities

* Plan participant loans

* Shares issued by a registered investment company

* Investment and annuity contracts issued by a qualified insurance company

* Any asset in an individual account over which the participant or beneficiary can exercise control and receives annual statements from a regulated financial institution describing the asset held or issued and the amount of such asset.

2. The plan must include additional disclosures in the Summary Annual Report (SAR) distributed to participants and beneficiaries.

* The names of the financial institutions holding the “qualifying plan assets” and the amount of such assets as of the end of the plan year (with certain exceptions).

* The names of the companies issuing fidelity bonds, if the plan has more than 5% in “non-qualifying plan assets”.

* Disclosure that participants and beneficiaries may request, without charge, copies of evidence of the required bonds and copies of the financial institution statements describing the “qualifying assets”.

* A statement that participants and beneficiaries should contact the DOL’s Employee Benefits Security Administration (EBSA) if they are unable to obtain said copies.