When it comes to 401k benefits, there are three types of eligible participants:
- Active-currently employed, covered, and receiving credited service. This includes those eligible but not participating.
- Retired or separated-no longer employed by the company, but receiving benefits or entitled to receive benefits.
- Deceased-beneficiaries either receiving benefits or entitled to receive benefits.
An accurate count of eligible participants is crucial for any 401k audit. The information we gather will be incorporated into Form 5500, which will be filed with the IRS.
There are a few exceptions. The 80-120 Participant Rule allows a plan that filed Form 5500 as a small plan last year to file its current Form 5500 as a small plan again this year. This rule also allows a plan to forego the audit requirement if it currently has more than 120 participants at the beginning of the plan year.
Our experienced accountant will walk you through the 401k process to avoid any confusion. Call now to make an appointment.