# 401K Audit Solutions > --- ## Pages - [Contact](https://401kauditsolutions.com/contact/): Have a question or want to share your thoughts? We're here to assist with all your EBP audit and accounting needs – don't hesitate to reach out! - [Blog](https://401kauditsolutions.com/blog/): Stay informed with expert insights on 401(k) audits, compliance updates, and employee benefit plan best practices. - [Services](https://401kauditsolutions.com/ebp-services/): We specialize in providing thorough and reliable audits for your retirement plans, ensuring compliance and peace of mind. - [Home](https://401kauditsolutions.com/): 401(k) audit services made easy. Ensure compliance, reduce risk, and gain peace of mind with end-to-end support from benefit plan audit specialists. --- ## Posts - [Employer 401(k) Matching Contributions: Understanding 401k Auditing](https://401kauditsolutions.com/articles/401k-employer-matching-contributions/): Discover how employer 401(k) matching contributions work, which formulas are most effective, and what compliance rules apply. - [Student Loan 401k: Payment Matching in 401(k) Plans as a Retention and Engagement Tool](https://401kauditsolutions.com/articles/401k-student-loan-matching/): Support employees burdened by student debt with 401(k) matching contributions tied to their loan payments. - [Choosing a 401k Audit Firm for Starter 401(k) Plans: A Streamlined Option for Small Employers](https://401kauditsolutions.com/articles/choosing-a-401k-audit-firm-for-starter-401k-plans/): Starter 401(k) plans offer small businesses a simple, low-cost retirement option. Ideal for firms without existing plans. - [Automatic 401k Enrollment: A Win-Win for Retirement Saving](https://401kauditsolutions.com/articles/automatic-401k-enrollment/): Automatic 401k enrollment boosts participation and how a 401k auditor ensures compliance. Retirement planning while meeting legal requirements. - [Impact of SECURE 2.0 Act on 401k Plans](https://401kauditsolutions.com/articles/401k-catch-up-rules-in-2025/): Learn about the audit requirement for 401k plans and understand who audits 401k plans. Stay compliant with essential retirement plan insights. - [2025 401(k) Contribution Limits: Everything You Need to Know](https://401kauditsolutions.com/articles/2025-401-k-contribution-limits/): Learn about the updated 2025 401(k) contribution limits, including new catch-up rules. Stay compliant with IRS requirements. - [What is 401k? Understanding Your Retirement Plan](https://401kauditsolutions.com/articles/what-is-401k-understanding-your-retirement-plan/): Discover how a 401(k) plan helps you save for retirement with tax benefits, employer matching, and long-term growth potential. - [Facing a 401(k) Audit Deficiency?](https://401kauditsolutions.com/articles/facing-a-401k-audit-deficiency/): Learn what to do if your 401(k) audit is flagged for deficiencies. Fix errors, avoid penalties, and get back on track with expert guidance. - [How to Prepare for Your 401(k) Plan Audit](https://401kauditsolutions.com/articles/how-to-prepare-for-your-401k-plan-audit/): Get audit-ready with a step-by-step guide to preparing your 401(k) plan. Learn what documents you need and how to avoid common mistakes. - [401(k) Audit & Employee Benefit Plan Audit Services: What You Need to Know](https://401kauditsolutions.com/articles/401k-audit-employee-benefit-plan-audit-services-what-you-need-to-know/): Professional 401(k) and employee benefit plan audit services to ensure compliance, accuracy, and timely Form 5500 filing. Trusted by businesses nationwide. - [401(k) Audit Requirements in 2025: What Employers Need to Know](https://401kauditsolutions.com/articles/401k-audit-requirements-in-2025-what-employers-need-to-know/): Understand the 2025 401(k) audit requirements, participant thresholds, and filing rules to stay compliant and avoid penalties. --- # # Detailed Content ## Pages ### Contact > Have a question or want to share your thoughts? We're here to assist with all your EBP audit and accounting needs – don't hesitate to reach out! - Published: 2025-03-29 - Modified: 2025-04-21 - URL: https://401kauditsolutions.com/contact/ Contact UsHave a question or want to share your thoughts? We’re here to assist with all your EBP audit and accounting needs – don’t hesitate to reach out!  (941) 756-0700lbuck@waltersaccounting. comVisit Sarasota Office 3277 Fruitville Road, Building ESarasota, FL 34237Visit St. Petersburg Office 5858 Central Ave. St. Petersburg, FL 33707Contact Get Your Free Quote Walters & Associates, CPAs offers a free, no obligation consultation to answer any questions you may have about audit requirements for your companies benefit plan. Or Call Us at (941) 756-0700   --- ### Blog > Stay informed with expert insights on 401(k) audits, compliance updates, and employee benefit plan best practices. - Published: 2025-03-24 - Modified: 2025-04-21 - URL: https://401kauditsolutions.com/blog/ Contact Get Your Free Quote Walters & Associates, CPAs offers a free, no obligation consultation to answer any questions you may have about audit requirements for your companies benefit plan. Or Call Us at (941) 756-0700   --- ### Services > We specialize in providing thorough and reliable audits for your retirement plans, ensuring compliance and peace of mind. - Published: 2025-03-24 - Modified: 2025-04-21 - URL: https://401kauditsolutions.com/ebp-services/ We specialize in providing thorough and reliable audits for your retirement plans, ensuring compliance and peace of mind. 401(k) Plans are a popular retirement savings option, allowing employees to save and invest a portion of their paycheck before taxes are taken out. Employers often match contributions, enhancing the growth potential of these savings. With tax advantages and the potential for employer contributions, 401(k) plans are a cornerstone of retirement planning. 401(k) plans offer significant benefits, including tax-deferred growth, employer matching contributions, and a variety of investment options. These features make 401(k) plans an attractive choice for both employers and employees looking to secure their financial future. Our 403(B) Plan audits are designed to ensure compliance and maximize the benefits for both employers and employees. These plans are tailored for public education organizations, non-profits, and certain ministers, offering tax-deferred growth on retirement savings. Our meticulous audit process helps identify areas for improvement, ensuring that your plan meets all regulatory requirements and operates efficiently. Trust our expertise to safeguard your 403(B) Plan and enhance its performance. Pension Plans are a cornerstone of retirement security, providing a steady income stream for retirees. Our audit services for Pension Plans focus on ensuring the financial integrity and regulatory compliance of these plans. We delve deep into plan operations, financial statements, and compliance issues to provide a thorough evaluation. With our expert guidance, you can rest assured that your Pension Plan is managed effectively, offering peace of mind to plan participants and sponsors alike. Profit-Sharing Plans... --- ### Home > 401(k) audit services made easy. Ensure compliance, reduce risk, and gain peace of mind with end-to-end support from benefit plan audit specialists. - Published: 2025-03-23 - Modified: 2025-04-21 - URL: https://401kauditsolutions.com/ 401(k) Audit Solutions401(k) plans are governed by ever-changing rules and regulations issued by Congress, the IRS, DOL, ERISA, and the Social Security Administration. Our 401(k) auditors have years of experience and perform over 60+ audits annually. An incomplete, late, or inadequate 401(k) audit report may result in significant penalties and plan termination. Our standard, 6-phase 401(k) audit services is a comprehensive process, performed virtually and on your schedule.  We Audit All Types of EBP Walters & Associates, CPAs offers a free, no obligation consultation to answer any questions you may have about audit requirements for your companies benefit plan. Who performs an annual 401(k) audit? Audits must be performed by an independent auditor that does not have ties to the employer or the plan. This means that financial companies that manage recordkeeping, accounting, and/or financial statements for your business cannot perform your plan’s annual 401(k) audit—as they aren’t considered independent sources. How much do 401(k) audits cost employers? The cost of audits depends on different factors, including business size and audit type. According to some sources, annual audit costs range from $8,000 to $12,000 for small- to medium-sized businesses (plans with fewer than $50 million in assets)—although some audit fees have been as high as $18,000. Limited scope audits require less review, so they’re often more affordable than full-scope audits. Our Services Employee Benefit Plans We audit following plans below401(k) Plans A 401(k) plan is a company-sponsored retirement account in which employees can contribute a percentage of their income. Employers... --- --- ## Posts ### Employer 401(k) Matching Contributions: Understanding 401k Auditing > Discover how employer 401(k) matching contributions work, which formulas are most effective, and what compliance rules apply. - Published: 2025-05-18 - Modified: 2025-05-18 - URL: https://401kauditsolutions.com/articles/401k-employer-matching-contributions/ - Categories: 401k Employer 401(k) Matching Contributions: Understanding 401k Auditing Employer 401(k) matching contributions are a cornerstone of many retirement plans, where employers contribute to an employee’s 401(k) account based on the employee’s own contributions. In essence, a match is extra money from the employer that “matches” a portion of what the employee sets aside from their paycheck. This practice is designed to encourage employees to participate in the plan and save for retirement, as not taking full advantage of a match is often likened to leaving free money on the table. In this article, we will explain what employer matching contributions are, describe common matching formulas, discuss their impact on employee participation and retirement outcomes, and outline key compliance and audit considerations for plan sponsors, including the Department of Labor (DOL) and its role in setting guidelines and regulations for 401(k) audits. Properly structured employer matches can boost employees’ retirement security while helping plan sponsors meet 401(k) auditing participation and nondiscrimination testing goals. What Are Employer 401(k) Matching Contributions? Employer 401(k) matching contributions are contributions a company makes to its employees’ 401(k) retirement accounts, determined by how much the employees themselves contribute. In a typical arrangement, the employer adds a certain amount for each dollar an employee defers into the 401(k), up to a defined limit. For example, an employer might contribute an additional 50 cents for every $1 the employee contributes – a 50% match – usually capped at a percentage of the employee’s salary. If an employee earning $50,000 contributes... --- ### Student Loan 401k: Payment Matching in 401(k) Plans as a Retention and Engagement Tool > Support employees burdened by student debt with 401(k) matching contributions tied to their loan payments. - Published: 2025-05-12 - Modified: 2025-05-12 - URL: https://401kauditsolutions.com/articles/401k-student-loan-matching/ - Categories: 401k Student Loan 401k: Payment Matching in 401(k) Plans as a Retention and Engagement Tool As millions of employees are burdened by student debt, forward-thinking employers are looking for ways to support their workforce without sacrificing retirement outcomes. One such strategy gaining traction is student loan payment matching in 401(k) plans. The SECURE 2. 0 Act introduces a new benefit as part of a suite of resources designed to assist employers in implementing a student debt retirement savings match. This article explains how it works, the operational implications for plan sponsors and key considerations for compliance during implementation and 401k auditing. Introduction to Student Loan Benefits The rising burden of student debt has become a significant concern for many employees, making it challenging to save for retirement. To assist employees with student debt, some employers offer student loan benefits, such as employer matching contributions based on student loan payments. These benefits can help employees pay off their student loans while also saving for retirement through a workplace retirement plan, such as a 401(k) auditing. Employer matching contributions can be a valuable advantage, allowing employees to receive available matching contributions to their retirement account. By offering student loan benefits, employers can attract and retain workers, as well as help them manage their student debt and save for retirement. The new provision, introduced by the SECURE 2. 0 Act, allows employers to make matching contributions to a retirement plan based on qualified student loan payments. This benefit is designed to help employees who... --- ### Choosing a 401k Audit Firm for Starter 401(k) Plans: A Streamlined Option for Small Employers > Starter 401(k) plans offer small businesses a simple, low-cost retirement option. Ideal for firms without existing plans. - Published: 2025-05-11 - Modified: 2025-05-11 - URL: https://401kauditsolutions.com/articles/choosing-a-401k-audit-firm-for-starter-401k-plans/ - Categories: 401k Choosing a 401k Audit Firm for Starter 401(k) Plans: A Streamlined Option for Small Employers A Starter 401(k) plan is a simplified retirement plan designed for employers who do not already sponsor retirement plans, offering a way to start a qualified 401(k) with minimal compliance burden. Under this design, all participating employees may make salary deferrals (including Roth), but the plan prohibits any employer contributions (no matching or profit-sharing). To ease start-up, the Starter 401(k) carries fewer administrative requirements – for example, it is automatically exempt from the usual nondiscrimination (ADP) and top-heavy testing – but in exchange the law caps each participant’s deferrals at a low fixed limit (currently $6,000 plus a $1,000 catch-up for those 50+). In short, a Starter 401(k) makes it easier to launch a plan by sacrificing higher savings potential for simplicity. Introduction to Starter 401(k) Plans A starter 401(k) plan is an excellent way for small businesses and organizations to provide their employees with a retirement savings option. These plans are designed to be efficient, cost-effective, and easy to manage, making them an ideal choice for companies that are just starting to offer a 401(k) plan to their employees. With a starter 401(k) plan, businesses can attract and retain top talent, while also helping their employees save for their future. As a CPA firm with extensive experience in employee benefit plan audits, we can help guide you through the process of setting up and managing a starter 401(k) plan. Employer and Employee Eligibility Eligible... --- ### Automatic 401k Enrollment: A Win-Win for Retirement Saving > Automatic 401k enrollment boosts participation and how a 401k auditor ensures compliance. Retirement planning while meeting legal requirements. - Published: 2025-05-03 - Modified: 2025-05-03 - URL: https://401kauditsolutions.com/articles/automatic-401k-enrollment/ - Categories: 401k Automatic 401k Enrollment: A Win-Win for Retirement Saving Automatic enrollment in 401(k) plans has transformed how millions of Americans save for retirement. Instead of requiring employees to fill out forms and opt in, many companies now automatically enroll workers in the 401(k) plan by default, unless the employee actively opts out. This simple plan design tweak – moving from an “opt-in” to an “opt-out” approach – has proven to significantly boost participation rates and help more people build nest eggs for the future. It is crucial to provide disclosures and documents to plan participants, ensuring they are informed about their rights and responsibilities. This includes documents like the summary plan description and annual notices, which help participants understand plan operations and make informed decisions. Additionally, regular plan reviews by a 401k auditor help ensure compliance with regulatory standards and protect participant interests. This blog-style article explains what automatic enrollment is, how it works, its benefits for both employees and employers, key compliance and legal considerations, best practices for implementation, and how to address common objections or myths. The tone is professional yet approachable, aiming to demystify automatic 401(k) enrollment and illustrate why it’s widely considered a “win-win” strategy in retirement planning. Introduction to 401(k) Plans A 401(k) plan is a type of retirement savings plan offered by employers to their employees, allowing them to contribute a portion of their salary to a retirement account on a pre-tax basis. Named after the section of the U. S. Internal Revenue Code that... --- ### Impact of SECURE 2.0 Act on 401k Plans > Learn about the audit requirement for 401k plans and understand who audits 401k plans. Stay compliant with essential retirement plan insights. - Published: 2025-05-01 - Modified: 2025-05-01 - URL: https://401kauditsolutions.com/articles/401k-catch-up-rules-in-2025/ - Categories: 401k Impact of SECURE 2. 0 Act on 401k Plans The SECURE 2. 0 Act of 2022 introduced sweeping changes to retirement plan rules in the United States, building on the original SECURE Act of 2019. The SECURE 2. 0 Act provides increased tax incentives for businesses to enhance employee satisfaction and improve overall business performance. The aim is to increase retirement savings access, enhance plan flexibility, and improve financial security for workers and retirees. This article highlights the most important changes affecting 401k plans, including automatic enrollment, catch-up contribution updates, RMD adjustments, Roth-related reforms, student loan matching, and more. The timeline of these changes spans from 2023 through 2027, and both employers and employees need to understand what’s coming. Introduction to Retirement Plans A retirement plan is a type of savings plan designed to help individuals secure their financial future after they retire. There are several types of retirement plans available, including 401k plans, individual retirement accounts (IRAs), and employer-sponsored retirement plans. These plans offer significant tax savings and flexible investment options, making them an attractive choice for those looking to build their retirement savings. One of the key benefits of retirement plans is employer contributions, such as matching contributions, which can significantly boost an employee’s retirement savings. Small business owners and self-employed individuals can also take advantage of retirement plans tailored to their needs, such as SEP IRAs and solo 401k plans. These plans can provide a steady income stream in retirement, helping individuals achieve their retirement goals. Understanding... --- ### 2025 401(k) Contribution Limits: Everything You Need to Know > Learn about the updated 2025 401(k) contribution limits, including new catch-up rules. Stay compliant with IRS requirements. - Published: 2025-04-27 - Modified: 2025-04-27 - URL: https://401kauditsolutions.com/articles/2025-401-k-contribution-limits/ - Categories: 401k 2025 401(k) Contribution Limits: Everything You Need to Know The IRS has released the new contribution limits for 401(k) retirement plans for 2025. These limits dictate how much you and your employer can contribute to your 401(k) in the coming year. Contributions to a traditional 401(k) plan are deducted from your gross income, thereby reducing your taxable income. Understanding these changes is essential for maximizing your retirement savings. In this article, we break down the updated 2025 limits — including the standard cap, catch-up contributions for those 50 and over, and total contribution limits — and explain what’s changed from 2024. 401(k) plans offer a limited menu of investment options, primarily mutual funds, for tax-advantaged growth. We’ll also discuss why these limits adjust over time and offer practical tips on how to take advantage of the new rules. Introduction to Retirement Plans Retirement plans are an essential component of an individual’s financial planning, providing a means to save for the future and ensure a comfortable post-work life. One of the most popular types of retirement plans is the 401(k) plan, which is a defined-contribution plan offered by employers to their employees. The 401(k) plan allows employees to make elective deferrals, which are contributions made to the plan on a pre-tax basis, reducing taxable income. Employer contributions, such as matching contributions, can also be made to the plan, increasing the overall retirement savings. The Internal Revenue Service (IRS) sets contribution limits for 401(k) plans, which can change annually. In addition to... --- ### What is 401k? Understanding Your Retirement Plan > Discover how a 401(k) plan helps you save for retirement with tax benefits, employer matching, and long-term growth potential. - Published: 2025-03-30 - Modified: 2025-04-26 - URL: https://401kauditsolutions.com/articles/what-is-401k-understanding-your-retirement-plan/ - Categories: 401k What is 401k? Understanding Your Retirement Plan Are you wondering, what is 401k? A 401(k) is a retirement savings plan your employer offers. It helps you save money with tax advantages and often includes employer contributions to boost your savings even more. In this article, we’ll break down how a 401(k) works, its key benefits, how to choose between Traditional and Roth options, and much more. Key Takeaways A 401(k) plan is an employer-sponsored retirement savings plan that allows employees to save for retirement with significant tax benefits, primarily through pre-tax contributions. Employees can choose between a Traditional and a Roth 401(k), each offering distinct tax advantages based on individual financial circumstances and retirement goals. Maximizing employer matching contributions and understanding vesting schedules are crucial strategies for enhancing retirement savings through a 401(k) plan. What is a 401(k) Plan? A 401(k) plan is a retirement savings strategy sponsored by employers, created to assist employees in preparing financially for retirement while offering considerable tax benefits. These plans are highly prevalent among the American workforce, with nearly 42% participating. Employers provide 401(k)s not just as an avenue for their staff to build secure futures, but also as an incentive for attracting and retaining skilled workers. The mechanism of a 401(k) plan is quite clear-cut. Employees opt to divert a portion of their income into this individual account where contributions Enjoy tax-deferred status until they are withdrawn. By selecting a percentage of wages that automatically deduct from each paycheck, contributing becomes effortless and... --- ### Facing a 401(k) Audit Deficiency? > Learn what to do if your 401(k) audit is flagged for deficiencies. Fix errors, avoid penalties, and get back on track with expert guidance. - Published: 2025-03-29 - Modified: 2025-04-26 - URL: https://401kauditsolutions.com/articles/facing-a-401k-audit-deficiency/ - Categories: 401k Facing a 401(k) Audit Deficiency? Receiving notice of a 401(k) audit deficiency can be unsettling for any plan sponsor or administrator. Whether it’s a missing document, a reporting error, or a compliance lapse, the Department of Labor (DOL) takes these issues seriously — and so should you. But a deficiency doesn’t have to spell disaster. With the right understanding and a proactive approach, you can resolve issues efficiently and avoid deeper penalties. What Is a 401(k) Audit Deficiency? A 401(k) audit deficiency typically refers to a failure in meeting audit requirements for plans classified as “large plans” — those with 100 or more participants with account balances at the beginning of the plan year. Common deficiencies include: Not submitting an independent auditor’s report with Form 5500 Submitting an incomplete or poor-quality audit report Failing to address issues raised in a prior audit Using an auditor without proper EBP (Employee Benefit Plan) experience Late or missed filings How Will You Be Notified? You may receive a notice from: The Department of Labor (DOL) The IRS (during a compliance check or audit) An alert from your TPA (third-party administrator) or compliance provider The notice will outline the nature of the deficiency, the deadline to respond, and the steps you must take to correct the issue. What Happens Next? Here’s what to expect once a deficiency is identified: 1. Deadline to Correct You’ll typically be given a short window (often 30–45 days) to fix the issue — whether that’s submitting a corrected audit... --- ### How to Prepare for Your 401(k) Plan Audit > Get audit-ready with a step-by-step guide to preparing your 401(k) plan. Learn what documents you need and how to avoid common mistakes. - Published: 2025-03-29 - Modified: 2025-04-03 - URL: https://401kauditsolutions.com/articles/how-to-prepare-for-your-401k-plan-audit/ - Categories: 401k How to Prepare for Your 401(k) Plan Audit If your company’s 401(k) plan meets the threshold for a mandatory audit, preparation is key to ensuring a smooth and stress-free process. A 401(k) plan audit is not just a regulatory obligation it’s also an opportunity to strengthen your plan’s operations, uncover risks, and build trust with employees and regulators. In this guide, we’ll walk you through how to prepare effectively for your 401(k) plan audit.   1. Understand If You Need an Audit Before you prepare, confirm whether your plan actually requires an audit: 100-participant threshold: Only participants with account balances are counted (as of the 2023 rule update). 80/120 Rule: If your plan filed as a small plan last year and now has fewer than 121 participants, you may still qualify as a small plan. If your plan qualifies as a “large plan,” an independent audit is required and must accompany your Form 5500 filing.   2. Select a Qualified Auditor Early Start early by hiring an independent CPA who specializes in employee benefit plan audits. Besides, make sure that 401k audit cost is reasonable and no suprises. Look for: Experience with ERISA and DOL requirements Familiarity with 401(k) recordkeeping systems A clear timeline and scope of work The auditor will need full access to financial statements, plan documents, and administrative processes.   3. Gather Your Documentation Proper documentation is the foundation of a smooth audit. Be ready to provide: Plan Document & Amendments Summary Plan Description (SPD) Annual Form... --- ### 401(k) Audit & Employee Benefit Plan Audit Services: What You Need to Know > Professional 401(k) and employee benefit plan audit services to ensure compliance, accuracy, and timely Form 5500 filing. Trusted by businesses nationwide. - Published: 2025-03-29 - Modified: 2025-04-26 - URL: https://401kauditsolutions.com/articles/401k-audit-employee-benefit-plan-audit-services-what-you-need-to-know/ - Categories: 401k 401(k) Audit & Employee Benefit Plan Audit Services: What You Need to Know As companies grow and expand their workforce, offering a 401(k) retirement plan becomes both a benefit and a fiduciary responsibility. If your company’s plan reaches certain thresholds, a 401(k) audit — or broader Employee Benefit Plan (EBP) audit — becomes not just advisable, but mandatory. This article provides an overview of these audits and the services available to support compliance and financial integrity.   What Is a 401(k) Audit? A 401(k) audit is an independent examination of your retirement plan’s financial statements, processes, and compliance with federal regulations — particularly the Employee Retirement Income Security Act (ERISA) and Department of Labor (DOL) requirements. These audits typically apply to “large plans,” which are defined as those with 100 or more participants with account balances at the start of the plan year. When Is a 401(k) Audit Required? A 401(k) audit is required when: The plan has 100 or more eligible participants with balances (per the 2023 rule update). You file Form 5500 as a “large plan. ” You do not qualify under the 80/120 participant rule (which allows small-plan treatment for plans with up to 120 participants under specific conditions).   What Is an Employee Benefit Plan (EBP) Audit? An EBP audit refers to the examination of various types of employee benefit plans, not just 401(k)s. These can include: 403(b) plans Pension plans Profit-sharing plans Health and welfare benefit plans These audits verify the financial integrity of the... --- ### 401(k) Audit Requirements in 2025: What Employers Need to Know > Understand the 2025 401(k) audit requirements, participant thresholds, and filing rules to stay compliant and avoid penalties. - Published: 2025-03-29 - Modified: 2025-04-03 - URL: https://401kauditsolutions.com/articles/401k-audit-requirements-in-2025-what-employers-need-to-know/ - Categories: 401k 401(k) Audit Requirements: What Employers Need to Know As we move through the year, the audit requirements for 401(k) plans in the United States continue to evolve — especially after regulatory changes that took effect in recent years. If you’re an employer or plan administrator, understanding whether your 401(k) plan needs an audit (and what that involves) is essential to staying compliant and avoiding penalties. Who Needs a 401(k) Audit? Traditionally, if a 401(k) plan had 100 or more eligible participants at the beginning of the plan year, it was considered a “large plan” and required an annual independent audit as part of the Form 5500 filing. Key Change: Only Participants With Account Balances Count Under the new rule, only employees with an account balance in the 401(k) plan are counted toward the 100-participant threshold. That means: If someone is eligible for the plan but hasn’t enrolled or contributed, they are not counted. This change has helped many plans avoid unnecessary audits simply because they had a high number of eligible-but-inactive employees. The 80/120 Rule Still Applies The 80/120 Rule offers more flexibility: If your plan had fewer than 100 participants with account balances in the previous year, you can continue to file as a “small plan” until you reach 120 participants. So even if your participant count grows above 100 but stays under 120, you can delay the audit requirement.   What Does the Audit Involve? If your plan does require an audit, here’s what that means: You must... --- ---