401(k) Plan Audit Requirement Checker

    ERISA generally requires an annual CPA audit when a plan has 100 or more participants with account balances at the start of the plan year. Enter your count to see where you stand.

    How many participants with account balances did your plan have at the beginning of the plan year?

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    Count current and former employees with an account balance on the first day of the plan year. Eligible employees with no balance are not counted (2023+ plan years).

    How the 401(k) Audit Requirement Works

    The audit requirement follows your plan's Form 5500 filing category. Small plans file as small and generally do not need an audit. Large plans file Form 5500 with Schedule H and must attach the report of an independent qualified public accountant (IQPA) under ERISA Section 103.

    The 100-participant test

    For plan years beginning on or after January 1, 2023, the Department of Labor changed how defined contribution plans count participants (29 CFR 2520.103-1). The test now counts participants with account balances on the first day of the plan year, rather than every eligible employee. Former employees who left money in the plan still count; eligible employees who never enrolled and have no balance do not. A plan with 100 or more participants with account balances generally needs an audit.

    The 80–120 participant rule

    If a plan has between 80 and 120 participants at the start of the plan year and filed a Form 5500 for the prior year, it may elect to file in the same category as the prior year. A plan that filed as small last year can therefore keep filing as small — and skip the audit — until it passes 120 participants. Once a plan exceeds 120, it must file as large.

    Audit scope and timing

    When a bank, trust company, or insurance company certifies the plan's investment information, the plan may elect an ERISA Section 103(a)(3)(C) audit (formerly called a limited-scope audit), which does not audit that certified investment information. Payroll contributions, distributions, loans, and participant data are still tested. Form 5500 is due by the last day of the seventh month after plan year-end, and Form 5558 extends that by 2½ months. Starting the audit well before the deadline leaves room to correct late deposits or other issues the audit uncovers.

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    401(k) Audit FAQ

    For defined contribution plans such as 401(k)s, plan years beginning on or after January 1, 2023 count only participants with account balances at the beginning of the plan year (29 CFR 2520.103-1). Former employees who still have balances count; eligible employees who never contributed and have no balance do not. Before 2023, all eligible employees were counted.

    If a plan has between 80 and 120 participants at the beginning of the plan year and filed a Form 5500 for the prior year, it may elect to file in the same category (small or large) as the prior year (29 CFR 2520.103-1(d)). A small-plan filer with up to 120 participants can therefore keep filing as small and skip the audit. A plan with fewer than 100 participants can generally file as a small plan regardless of its prior filing.

    A large-plan Form 5500 filed without the required audit report can be rejected and treated as not filed. The DOL may assess civil penalties under ERISA Section 502(c)(2), which are adjusted annually for inflation, and the IRS may assess a separate late-filing penalty of $250 per day up to $150,000 (IRC 6652(e)). Delinquent filers can use the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP) to reduce penalties.

    July 31 for calendar year (December 31) plans, with an automatic 2.5-month extension to October 15 available by filing Form 5558. Large plans must attach the independent auditor's report to the Form 5500 filing.

    Under ERISA Section 103(a)(3)(C), plans can exclude investment information certified by a qualified institution (a bank, insurance company, or similar entity) from the audit scope. This reduces audit scope but does not eliminate the audit requirement for large plans. Under auditing standard SAS 136 (effective for plan years ending on or after December 15, 2021), limited-scope audits are called "ERISA Section 103(a)(3)(C) audits."

    Generally no. A plan with fewer than 100 participants with account balances at the start of the plan year can file as a small plan, which does not require an audit. The exception is a plan that filed as a large plan the prior year and elects under the 80–120 rule to keep filing as large — that plan still attaches an audit report.

    Once a plan has more than 120 participants with account balances at the beginning of the plan year, the 80–120 rule no longer applies and the plan must file as a large plan with an independent audit. Many plans cross this line after growth or an acquisition, so it helps to engage an auditor early in that plan year.

    The audit must be performed by an independent qualified public accountant (IQPA): a licensed CPA or licensed public accountant who meets the Department of Labor's independence rules (29 CFR 2509.75-9). The auditor cannot, for example, also maintain the plan's financial records.

    Also see: Audit Requirement Checker | Single Audit Checker

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