Are you ready for your 403(b) plan audit?
POSTED BY: Administrator Administrator AT Tuesday, November 30 at 12:00 AMMany nonprofit organizations offer 403(b) plans to their employees, just as for-profit businesses offer 401(k) plans. In the past, 403(b) sponsors had a very limited filing requirement compared to their 401(k) sponsor counterparts. But that’s all changed.
For plan years beginning in 2009, 403(b) plans subject to ERISA will need to file a detailed return, just like other pension plans. For example, these plans previously had to file only a three-page Form 5500 with primarily just the first page completed, covering very basic plan information. No schedules were required to be attached, and there were no audit requirements.
ERISA 403(b) plan sponsors will have to provide plan financial information by filing a complete Form 5500, as well as all schedules that apply, including the schedule which reports the plan financial information. This applies to both large and small plans.
In addition, organizations that sponsor 403(b) plans with more than 100 participants at the beginning of the plan year will now need to comply with IRS audit requirements. To determine whether your plan has more than 100 participants, add up, as of the first day of the plan year beginning in 2009:
- The number of current employees who were actively participating,
- Current eligible employees who had declined to participate, and
- Former employees with an account balance.
If this total is more than 100, you'll need to obtain a plan audit.
If an audit is required, your CPA will review and comparatively report both current year and prior year plan financial information. The CPA also will analyze data at the participant level and determine whether your organization has the proper internal controls in place. At the end of the process, your CPA will issue an audited financial statement that you'll attach to your annual Form 5500 return.
Because organizations with 403(b) plans haven't had to consolidate plan financial information in the past, these new requirements may pose a challenge. Therefore, ERISA 403(b) plan sponsors who now have to file a more detailed return, whether for a large plan requiring an audit or a small plan, should begin gathering the required financial information for their 2009 403(b) plan Form 5500.
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