Under the Employee Retirement Income Security Act of 1974 (ERISA), employers in the private industry must meet certain standards when establishing pension and health care plans for their workers. Those who fail to comply with ERISA guidelines could face hefty financial penalties. In addition to providing participants with essential information regarding a plan’s funding and features, ERISA requires the corporate accounting department at certain companies to conduct periodic audits of their employee benefit plan.

How Many Participants Does the Plan Have?

In general, the corporate accounting team must schedule an annual audit of their company’s employee benefit plan if it has at least 100 participants. This includes eligible workers who are not enrolled in the plan, as well as individuals who are no longer employed at the company but retain an account balance. A plan with at least 100 participants is considered a “large” plan and must undergo an audit every 12 months under ERISA.  

How Many Participants Did the Plan Have Last Year?

There is one exception to the above rule. If the plan was considered “small” last year and had between 80 and 120 participants at the start of this year, the corporate accounting administrator may opt to retain its status as a small plan when filing the annual report.

Thus, no annual audit is necessary. If your company establishes a new plan that has more than 100 participants, though, it would be categorized as a large plan from the start and would require an audit this year and every year thereafter for as long as it retains more than 80 participants.

If you want to learn more about complying with the standards set forth by ERISA, turn to Sharrard, McGee and Co., PA. With an office in Greensboro and one in High Point, they make it easy to protect your company’s bottom line. Visit their website to learn more about the corporate accounting services they are proud to provide or call (336) 272-9777 to talk to a tax advisor in Greensboro today.