Navigating the Evolving Landscape of 401(k) Audits

Greetings, retirement plan sponsors! Big news—The Department of Labor (DoL) has reshaped the contours of 401(k) audit requirements. If you’re a plan sponsor, you’d better be sitting down. This is your essential briefing on what’s changing and how it affects you.

What Is Changing in Participant Counting

In the past, ERISA classified your plan’s size based on the number of eligible participants. Fast forward to now, and the DoL has flipped the script. Starting in 2023, the key factor will be participants with account balances at the beginning of the year. It’s not a tweak; it’s transformative. A plethora of 401(k) and 403(b) plans will likely dip below the much-feared 100-participant audit threshold.

The Audit Itself: What to Expect

Let’s be clear: audits are not mere rubber-stamps of compliance. These are forensic deep-dives into your plan’s DNA—everything from participant-level testing to plan-level contributions, loans, non-discrimination testing, and yes, administrative expenses. Every plan is an individual, requiring a bespoke auditing approach.

Conclusion: The Future is Yours to Shape

Clock’s ticking. If you’re circling that 100-participant account balance, this is your prime time to consider some strategic account balance reductions. This isn’t just an audit-avoidance tactic; it’s smart, proactive plan management.

And here’s a shimmering beacon for the future: come 2024, courtesy of the SECURE Act 2.0, you can force out small account balances up to $7,000, a significant bump from the current $5,000. It’s not a loophole; it’s a lifeline for next year’s audit scenario.

So, what’s your game plan for these new audit landscapes?

P.S. Consider PEPs and Group Plans as Your Secret Sauce

While we’re on the topic of 401(k) audits, let’s not overlook Pooled Employer Plans (PEPs) and Group of Plans (GoPs). WELLthBuilder could be the key to eliminating or significantly reducing your audit obligations. Intrigued? Reach out to us to learn how you can make these work to your advantage.

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WELLthBuilder is presented by Strategic Retirement Partners (SRP), a leading national team of retirement plan-focused financial advisors. Let’s talk about your company’s retirement plan needs.

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