Good News for Small Employers: New EBSA Rules May Help You Avoid the “Large Plan” Audit Requirement

On February 23, 2023, the Employee Benefits Security Administration (EBSA) announced changes to the Form 5500 Annual Return and Form 5500-SF Short Form Annual Return. Among a handful of changes, they altered the participant-counting methodology for determining eligibility for simplified reporting alternatives to small plans.

The counting methodology for defined contribution plans will now be based on the number of participants with an account balance at the beginning of the plan year.  This replaces the current method that counts the number of eligible participants even if they are not participating in the plan and do not have an account balance.  

The cost of an annual audit, as required when filing as a “large plan,” is not insignificant for small businesses.  This change should help small employers reduce these plan-related expenses and hopefully encourage more small employers to offer a workplace retirement program.

More information can be found on the DOL website


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