Plan Sponsors Ask…

Question: Can you clarify the U.S. Department of Labor’s new 401(k) audit rule for Form 5500?

Answer: For Form 5500 purposes, 401(k) plans with 100 or more participants at the beginning of the plan year are considered a “large plan,” whereas plans with fewer participants are considered a “small plan.” Large plans must file an audit report with their Form 5500 while most small plans do not.

Recent U.S. Department of Labor (DOL) changes to the  Form 5500 now allow plans to count fewer participants when determining the need for an audit. Under the previous method, 401(k) plans had to count all eligible participants, regardless of whether they had an account balance. With the new method (which is effective for plan years beginning on or after January 1, 2023), plans must only count participants with an account balance. The DOL expects the change to eliminate the audit requirement for 20,000 small business 401(k) plans. This is good news considering the cost, time and effort of an audit for employers. Small businesses should understand how the method will affect their 401(k) plan’s audit status this year. To view a summary of the DOL’s changes to Form 5500, go to:


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