The Department of Labor (DOL) recently updated the rules regarding 401k audit requirements asfollows,whichapply to Form 5500. These changes, along with the application of the rules regarding 401k audit requirements to Form 5500,are the same rules as those regarding 401k audit requirements to Form 5500. or redefining how the number of participants will be counted
after January 1, 2023, and how they impact the Evaluation. Whether you are a sponsor or an advisor, understanding these new changes is important to ensuring compliance and avoiding unnecessary audits. Let’s go over the key points and examine possible steps you can take to help your clients adapt to these changes.
What changes have occurred to the 401k audit rules?
The Department of Labor issued a notice dated February 23, 2023, making significant changes to the 401k assessment rules. Here’s what you need to know:
Changes to Fund Balances from Eligible Participants:
401k audit requirements
401k audit requirements are now based on the plan’s fund balance as of the first day of the plan year. Account balances must be reported on a new section of Form 5500.
New Audit Thresholds
Plans with an account balance of 100% or more on the first day of the year generally require a 401k audit. These types of funds are used for plan contributors and former employees.
Impact on Projects
The Department of Labor estimates that more than 19,000 projects that previously required audits will not need to be audited in 2023 because those projects have fewer than 100 accounts (although many have more than 100 participants).
80/120 RULE
This rule still applies, but it now applies to a set of past-due accounts rather than participants. A participant with a balance at the beginning of the year can file the same form (i.e., Form 5500-SF) as the previous year without triggering a 401k audit.
Why 401ks Need an Assessment
The Department of Labor uses the balance sheet as a metric to measure complexity and control while respecting plan burden. For many plans, this change can mean fewer audits and lower costs. However, careful planning is still needed to ensure regulatory compliance and optimize management. The 2022 deadline is Dec. 31, and the 2022 Form 5500-SF must be filed (without review) by year-end. January 1, 2023:
- If a plan has 80-120 accounts, it can continue to file Form 5500-SF for 2023 without triggering the 401k audit requirement.
- If a plan has 121 or more balances, it must file Form 5500 with the financial statement.
How to Help Clients Track 401k Audit Requirement
While it is too late to adjust balances for IB plans with a January 1, 2023 start date, there is still time to prepare for plans with a later start date. Here are some steps you can take to help your customers:
Help clients develop a process to track the back of the balance sheet and deduct participants each year. review. important. By assisting your clients with preparing account management and audit documentation, you can help them avoid unnecessary audits and simplify their management. Respect retirement, or if you need help planning, please contact us. Together, we can ensure your clients get the most out of our services. Optimized and always included throughout the content. It also provides effective advice and clear examples that will capture the reader’s attention while maintaining its originality.
Over 100. Do a quick calculation of the little equation. Contact Former Employees:
Remind former employees with large balances to familiarize themselves with their 401(k) accounts.
Update Plan Information:
If the plan does not have a default withdrawal option, help your client update the plan to allow for the removal of small balances. The withdrawal limit is expected to increase from $5,000 to $7,000 effective January 1, 2024.
Explore More: Retirement Planning: Building a Secure Future
