How Do I Count Participants to Determine Whether My Plan Requires an Audit?
Only large plans with 100 or more eligible participants as of the first day of the plan year need to file a plan audit with Form 5500, but determining the number of participants isn’t as straightforward as it sounds. For more details about plan audits, please see our Help Center article "How Plan Audits Work."
The sponsor portal homepage shows the current number of participants with balances, you can always check your current count, However, please note that this count will be as of the current date (not the beginning of the plan year).
For an exact participant count as of the beginning of the plan year, email email@example.com and request a custom report.
How to count the number of participants:
- Any participant with an account balance is counted towards the 100 rule.
- Remember to make the determination on all employees as of the first day of the plan year.
- Terminated participants with an account balance are included in the final count.
Some additional special rules for certain kinds of plans:
- Plans with between 80-120 participant account balances. If a plan that has been filing the forms required for a small plan filer has its participant account balance level rise above 99, but not above 120, it may continue to treat itself as a small plan filer and therefore avoid the plan audit requirement. So long as the participant account balance count does not rise above 120, there is no limit on the number of years an employer can use this exception as long as the small plan filer rules were applied in the year before. This exception is not applicable to a new plan that starts with a participant account balance count above 99. A plan must have at least one year with a participant account balance count below 100, where it is eligible to file as a small plan filer before it can use this exception when the participant account balance count rises above 99. If for any year the participant account balance count is above 99 but not above 120, the employer elects to be treated as a large plan filer, then it must file as a large plan filer for all subsequent years unless the participant account balance count drops below 100.
- Employers that sponsor two or more plans. Each plan determines its filing status separately, based on the participant count in that plan. The fact that plans are permissively aggregated for coverage testing does not affect their filing status for Form 5500 purposes. However, if two or more employers are in a controlled group or an affiliated service group, they may maintain a single plan and one audit. As such, the employer should add the total number of participants to determine whether or not it must undergo a large plan audit. To be a single plan, the assets of the plan must be available on an ongoing basis to pay all benefits of the plan. This requirement can be confusing for defined contribution plans. For example, where participants in a defined contribution plan direct their own investments, only the investments chosen by a participant are available to pay that participant's benefits. The right of participants to direct their own investment should not alone cause the plan to fail to be a single plan. Rather, the manner in which the plan would deal with non-directed investments must be examined.
- Non-related employers maintaining a single plan (such as multiple employer plans (MEPs)). Two or more employers that do not constitute a controlled group or an affiliated service group are permitted to maintain a single plan in certain circumstances, and it may be possible to have only one annual return to cover all employers. As such, a plan is considered to have more than 100 participants if the aggregate number of participants in the MEP equals 100 or more.
Additional resources from other sources: