How often do 401k plans get audited?
A 401(k) plan undergoes an audit every year if it satisfies the Form 5500 reporting criteria for large plans. Under DOL guidelines, large plans face an annual independent review. Smaller plans do not automatically need a yearly independent audit. However — the IRS or DOL — will still examine a small plan if they locate irregularities.
Does a 401(k) plan need an audit every year?
Not always. The need for an outside review varies entirely with the filing status for the specific year. For defined contribution plans, the total number of participants is taken into consideration with account balances on the first day of the plan year. When that number reaches 100 or more, the plan is generally treated as a large plan for Form 5500 purposes, unless the 80–120 participant rule allows it to stay in the prior year’s category. If the count is below 100, the plan is generally treated as a small plan, but a small pension plan avoids the annual outside audit only if it meets the audit-waiver conditions.
What makes the audit requirement annual?
The review happens annually as you file Form 5500 every year. When you file using Schedule H, the plan administrator hires an independent qualified public accountant. Their report is attached directly to the filing unless you qualify for a specific waiver. Once the plan enters the large plan category, expect an outside review every plan year until the status changes.
Do small 401(k) plans get audited every year?
No. Small plans are outside the annual independent review mandate. It does not mean they get a free pass. Federal agencies will still review the plan records as well as operations — even if you do not attach an outside CPA report to the Form 5500.
What is the 80 to 120 rule?
The 80 to 120 rule may allow a plan to stay in the same filing category it used the year before. If the participant count is between 80 and 120 and a Form 5500 was filed for the prior year, the plan may elect to remain in that prior filing category. The guideline dictates whether you should hire an outside auditor for the current filing cycle.
What should plan sponsors check each year?
Plan sponsors evaluate the filing position before preparing Form 5500. Look specifically at:
- The participant count in accordance with the current Form 5500 guidelines
- Former employees who maintain account balances
- First-year plan counting rules
- Prior-year filing status if the participant count lands between 80 and 120
- Whether you must attach an accountant's report this year
If you are not sure whether the plan requires an audit this year, reach out to us. Dimov Audit works with plan sponsors across the USA on 401(k) audit timing, participant counts, filing support, alongside year-end preparation.
