Compliance Request FAQ
- General
- Census and Payroll Summary
- Non-Discrimination Testing vs. Audit Testing
- Annual Questionnaire and Fee Schedules
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When does a 401(k) plan require an annual audit?
The Employee Retirement Income Security Act of 1974 (ERISA) requires annual audits of plan financial statements by an independent qualified public accountant of plans subject to the provisions of ERISA. A plan will require an audit if you have 100 or more participants with an account balance as of the first day of the plan year. If your plan is in its first plan year, you will require an audit if your plan has 100 or more participants with an account balance as of the last day of the plan year.
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What is the difference between non-discrimination testing and audit testing?
All 401(k) plans must undergo non-discrimination testing, but audit testing is required only for plans in which an annual audit is needed. Some differences between audit testing and non-discrimination testing include:
- Compliance documents and audit documentation have different deadlines. Non-discrimination testing must be completed before an audit can be initiated.
- More documentation is needed for audit testing. Documents requested will focus on specific employees chosen as part of the audit sample.