By Neena Shukla, CPA, CFE, CGMA, FCPA, CTP


  • Discussing the importance of employee benefit plan audits
  • Understanding the upcoming changes for the 2023 plan year
  • Navigating through the new requirements and guidelines

Employee benefit plans are an essential part of any organization, providing various benefits such as retirement savings, healthcare coverage, and other non-monetary perks to employees. With these plans becoming increasingly complex and heavily regulated, it is crucial for government contractors to stay updated on the latest audit requirements.

Change is ongoing in the world of employee benefit plans, and this year is no different. Significant regulatory updates, enacted by the U.S. Department of Labor (DOL), IRS, and the Pension Benefit Guaranty Corporation (PBGC), are set to change the landscape for auditors and plan administrators alike. As professionals in the field, staying abreast of these developments is crucial to ensuring compliance and avoiding the costly implications of missteps.

Specifically, this year introduces vital changes to the audit requirements for employee benefit plans, affecting how plan years beginning on or after January 1, 2023, are handled, particularly through the revised Form 5500 and Form 5500-SF. This blog is designed to clarify these changes for Plan Administrators, CPAs, and HR professionals responsible for managing these plans.

Understanding Participant Count Methodology

One of the most notable alterations is regarding the methodology for counting participants, which is pivotal in determining whether an audit is necessary. Previously, the participant count included all employees eligible for the plan, participating or not, along with any other individuals with plan balances. The updated regulations narrow this spectrum to only include participants with account balances at the beginning of the plan year.

This shift carries significant weight, as it may reduce the number of plans that cross the threshold requiring an independent qualified public accountant audit. For many, this change could mean exemption from the complex and often costly audit process—provided, of course, that their participant numbers fall below the critical 100-participant mark due to the new counting rule.

Implications for Plan Administrators and Auditors

Plan Administrators and HR professionals need to recalibrate their understanding of compliance requirements within this new framework. This recalibration includes accurately tracking participant counts and understanding the nuances of eligibility versus actual participation. It would also be wise to consult with CPAs and legal advisors to ensure the plan actions are aligned with the latest mandates.

For CPAs and auditors, a thorough comprehension of these modifications is essential. Not only will it impact the lead-up processes to potential audits, such as engagement letter stipulations and scope setting, but it may also reshape the auditing landscape with a likely reduction in the number of smaller benefit plan audits.

Action Steps to Ensure Compliance

To ensure alignment with the new audit requirements, there are some proactive measures that you can take:

  1. Review Your Participant Data: Begin by reassessing the participant data of your benefit plans against the new counting methodology. Pinpoint which plans could possibly be exempt from the audit requirement going forward.
  2. Stay Informed and Train Your Teams: Continually inform yourself and your team about changes to the Form 5500 series filing requirements. Internal training may be essential for adapting to these updates.
  3. Reevaluate Current and Future Audits: If your plan was close to the previous participant threshold, reevaluate the necessity for an audit under the updated rules. This re-evaluation could result in significant changes to your plan’s auditing schedule and budgets.
  4. Consult with Qualified Professionals: When in doubt, reach out to experienced ERISA attorneys or CPAs well-versed in employee benefit plan regulations. These professionals can provide clarity on these legislative updates and how they affect your specific circumstances.

Conclusion: Adaptation and Diligence are Key

This year advocates and administrators of employee benefit plans face a period of adjustment. With changes poised to reduce the audit burden for some plans, a diligent analysis of your particular situation is more crucial than ever. Remember to look beyond the immediate implications and adjust your strategies accordingly for what lies ahead.

Seize this opportunity to explore whether these changes can lessen organizational burdens or if they merely alter the procedural landscape you operate within. Regardless, understanding and proactively addressing these requirements will be paramount to maintaining compliant and effective employee benefit plans for the 2023 plan year and beyond.

Stay diligent, stay informed, and remember that in the ever-evolving world of benefit plan administration, knowledge is the cornerstone of compliance.