403(b) plan audit requirements

An ERISA-covered 403(b) plan files Form 5500. A plan that files as a large plan must generally attach the report of an independent qualified public accountant. A plan that files as a small plan can be exempt from the audit if it meets the small plan audit waiver conditions.

• The count. Beginning with 2023 plan year filings, a defined contribution plan counts participants with account balances at the beginning of the plan year. Before 2023, eligible employees without balances also counted.
• The line. 100 or more participants with account balances generally means large plan filing and an audit.
• New plans. A plan filing its first Form 5500 uses the number of participants with account balances at the end of the plan year.
• The 80-120 rule. If the count is between 80 and 120 and the plan filed a Form 5500 last year, it may file in the same category as last year.

Not sure where you land? Try our plan audit requirement checker. The participant rules are the same for 401(k) and 403(b) plans.

Some 403(b) arrangements are outside ERISA and file no Form 5500:

• Governmental plans, such as public school district plans.
• Church plans that have not elected ERISA coverage under Code section 410(d).
• Salary-reduction-only programs that meet DOL rule 29 CFR 2510.3-2(f): participation is voluntary, rights are enforceable only by the employee and the employer’s role is limited. Employer contributions generally take a plan outside this rule.

Private nonprofits, private schools and hospitals that make employer contributions are usually ERISA plans.

Due date. Form 5500, with the audit report attached, is due by the last day of the 7th calendar month after the plan year ends. For a calendar-year plan that is July 31. IRS Form 5558, filed by the normal due date, extends it by up to 2½ months.

Limited-scope audits. Under ERISA section 103(a)(3)(C) and DOL rule 29 CFR 2520.103-8, the auditor does not need to audit investment information prepared and certified by a regulated bank, similar institution or insurance carrier. Brokerage firms do not count as a similar institution. Auditing standards (SAS 136) set the form of opinion for this audit. Many 403(b) plans hold annuity contracts with insurance carriers, so ask your vendors whether they provide a certification.

Best for: nonprofits, private schools and health organizations whose 403(b) plan has reached, or is close to, 100 participants with account balances.

1. Free initial consultation. Share your plan document, last Form 5500 and participant count.
2. Fees quoted upfront, in writing. Transparent, fair fees in an engagement letter that states full or limited scope.
3. Vendor and record request. We list what we need from you, your recordkeeper and each annuity or custodial vendor.
4. Fieldwork, done remotely. We test contributions, distributions, loans, participant data and investments.
5. Report. We issue the audit report for your Form 5500 and discuss any findings with you first.