Frequently Asked Questions - Navigating Employee Benefit Plan Audit Requirements

January 8, 2018 | Article

What is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) protects the assets of employees and helps ensure the money they invest in an employee benefit plan will be available to them when they retire. Title I of ERISA describes annual reporting requirements for applicable employee benefit plans. Certain plans are exempt, including certain 403(b) plans falling under defined safe harbor rules. In general, ERISA applies to the following types of benefit plans:

  • Defined benefit (pension) and defined contribution plans (401(k), 403(b), ESOP, profit sharing, etc.) sponsored by non-governmental, non-church organizations
  • Funded health and welfare benefit plans (insured or otherwise)
  • Flexible Spending Accounts (FSAs)
  • Health Reimbursements Accounts (HRAs)

Please consult an attorney if you are unsure whether or not your plan is subject to Title I of ERISA.

Does my ERISA plan need an audit?
In general, plans with more than 100 participants as of the beginning of any plan year will require an audit for that year. However, there is an exception to this called the “80-120” rule. Refer to the flowchart below for guidance on determining whether a plan is considered a small plan or a large plan. A large plan requires an audit and must file Schedule H with its Form 5500 Annual Report. A small plan generally requires filing Form 5500 Schedule I, which does not require an audit.

Who is included in the “participant” count above?
The term “participant” for this purpose can be confusing. In general, the participant count includes all employees, regardless of participation, who are eligible to participate in the plan. The count also includes all participants who have separated employment yet maintain a balance (or a deferred, vested balance) within the plan as well as beneficiaries of deceased participants who are currently receiving benefits or are eligible to receive benefits in the future. Separate rules are defined for welfare benefit plans.

What is involved in an audit?
In an audit, auditors use knowledge gained about the plan’s internal control environment, the nature of the plan, and other factors to assess the reasonableness of the following areas: compliance with plan documents, participant eligibility and participant data, contributions to the plan, distributions from the plan, participant loans, plan investments and related income, plan expenses, related party and party-in-interest transactions, and tax compliance.

When is the audit required to be completed?
The Form 5500 (and required audit report, if applicable) is generally due seven months following the last day of the plan year (this would be July 31 for calendar year-end plans). The filing may be extended for an additional 2.5 months.  

Additional resources and guidance can be found in the Department of Labor’s Reporting and Disclosure Guide for Employee Benefit Plans.

Eide Bailly is a long-standing member of the AICPA Employee Benefit Plan Audit Quality Center. The firm performs audits of more than 800 employee benefit plans annually. Please visit our website or reach out to your Eide Bailly contact for additional information.

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