401(k) Audit Requirements

Better Understanding. Better Audit.

Basic Requirements For All 401(k) Audits

100+ Account Balances

Employers with 401(k) plans with 100 or more account balances at the beginning of a year are required to have an audit. Account balances include both active participants and terminated employees who have left money in the plan.

Independent Auditor

If required to be audited, the employer must find an independent, qualified auditor to perform the audit.


Form 5500

The audit report must be attached to the Form 5500 and filed by the original deadline of July 31st or the extended deadline of October 15th.



All aspects of the plan will be tested to ensure operations are in compliance with plan documents, laws, and regulations.

You’ve got questions, we have answers.

What are the Department of Labor and IRS audit requirements for a 401(k) plan?

A 401(k) plan’s audit requirement is based on the number of participants with account balances as of the beginning of the plan year. The DOL terms an employee benefit plan as a “large plan” and requires it to be audited in any year that it has 100 participants with account balances as of the beginning of the year (this includes both active and terminated participants). The audit must be attached to Form 5500, which must be filed by July 31st, unless extended to October 15th. As with many other government regulations, there are exceptions:

 Exception 1 (Short Plan Years) – Even if it is classified as a large plan due to its size, if a 401(k) has a plan year lasting seven months or less (for example, if it started in August and is a calendar year plan), the audit can be deferred to the next plan year. If participation significantly drops the next year, and no audit is required, the short plan year will still have to be audited.

Exception 2 (The 80/120 Rule) – If there are 121 or greater participants with account balances at the beginning of a year, the plan must be audited, no other options. However, if the count is anywhere between 80 and 120, that year’s requirement follows the prior year’s audit requirement. For example, in year 1, there were 90 participants with account balances, so no audit was required. In year 2, participants with account balances climbed to 115. Even though participants with account balances was above the 100 threshold, because it was still less than 120, it could elect to file as a small plan again. In year 3, when participants with account balances rise above 121, the plan will be required to have an audit.

How long will the audit take?

Once PriceKubecka receives access to your plan’s data, an audit can be completed in just a few weeks.

What will my auditor request?

We will need a lot of information to complete your 401(k) audit. But by granting us auditor access to your recordkeeper’s website, we can eliminate the document gathering burden. We’ll gather the basic plan documents, annual reporting documents, and payroll data so that you can focus on your business instead of the endless back and forth.

How do I determine the number of participants with account balances at the start of the plan year?

There are three types of account balances that need to be included in your number:

  • Active employees who have an account balance
  • Former employees: 
  • As employees leave the company, they may or may not remove their account balances from the plan. Any employees no longer employed by the company who still have a balance in their account on the first day of the plan year still count.
  • Deceased employees: Any deceased employees whose benefits have not been fully received by beneficiaries also count.

Does the auditor need to be in my city?

No, thanks to PriceKubecka’s remote technology an audit can be performed remotely regardless of which city or state your business resides. This also means that auditors no longer need to come to your office and disrupt your normal business practices. We perform audits nationwide. It’s a win-win for everyone.

Do I need an ERISA 103 (a)(3)(c) audit (fka a limited scope audit), or a non-ERISA 103 (a)(3)(c) audit (fka a full scope audit)?

First, let’s clarify the difference between the two audit types.

In July 2019, the AICPA Auditing Standards Board (ASB) issued a new auditing standard that updates the performance and reporting requirements of ERISA plans. As a result, limited-scope audits are now referred to as ERISA section 103(a)(3)(C) audits.

An ERISA 103(a)(3)(c) audit (formerly known as a limited scope audit) does not require the auditor to test investment information. The custodian holding the assets attests to the accuracy and completeness of this information, eliminating the need for an auditor to test it.

A non-ERISA 103 (a)(3)(c) audit (formerly known as a full scope audit) must be performed if certification cannot be obtained from a qualified institution (bank, trust company, or insurance company). If you need assistance in determining whether you will need an ERISA 103(a)(3)(c) audit or non-ERISA 103 (a)(3)(c) audit, please CONTACT US.

What is the deadline for the audit?

The Form 5500 (with the audit report attached) is required to be filed by July 31. If needed, you can request a one-time extension by filing a Form 5558. This will extend the deadline to October 15.

Don’t wait until the deadline.
Start your 401(k) audit today!