According to the Employee Retirement Income Security Act of 1974 (ERISA), employee benefit plans that meet the “large plan” definition for purposes of filing the Form 5500 are required to go through an annual audit of their financial statements by a certified public accountant. The Form 5500 filing status is determined by the number of participants in the plan at the beginning of the plan year. Plans with 100 or more participants at the beginning of a plan year are required to file the Form 5500 as a “large plan,” and plans with fewer than 100 participants at the beginning of a plan year should file as a “small plan.” Participants include former employees who have an account balance, employees who are eligible to participate but are not participating, and employees actively participating.
Under provisions of DOL Regulation 2520.103-1(c) and (d), however, an exception to the filing status determination rule exists for plans with between 80 and 120 participants; these plans would otherwise be required to switch between filing as a small or large plan. This “80-120 Rule” allows plans that fluctuate between 80 and 120 participants as of the beginning of a plan year the option to maintain the same filing status as the prior year when filing the Form 5500. For new plans or plans that did not file a Form 5500 in the previous year, the 80-120 Rule does not apply.
For example, if a plan with 85 participants at the beginning of the current plan year filed as a large plan on the prior year Form 5500, it may continue to file as a large plan for the current year or switch to filing as a small plan. Similarly, if a plan with 120 participants at the beginning of the current plan year filed as a small plan on the prior year Form 5500, it may switch to filing as a large plan or continue filing as a small plan for the current year.
If you need help determining whether your employee benefit plan meets the audit requirement, or if you need more information on the 80-120 Rule, please contact your accounting advisor at Geffen Mesher or our EBP team.
