Expert Perspectives

Squire provides complete and personalized accounting solutions to meet your individual needs.

Expert Perspectives

Squire provides complete and personalized accounting solutions to meet your individual needs.

What is a 401(k) audit and how can I keep my business in compliance?

If you’re behind the wheel as the owner of a company or small business, you know that sponsoring benefits such as a 401(k) can be a great way to hire talent. However, there are forms and compliance demands that come along with supplying such a perk.

Companies with a 401(k) plan must file a Form 5500 each year by July 31 in order to maintain their tax-exempt status and satisfy the annual reporting requirements under Title I and IV of the Employee Retirement Income Security Act and the Internal Revenue Code. Submitted every year, this form supplies the government with information such as the plan’s financial condition, operations, and investments.

WHAT IS THE FORM 5500?

Of course, companies – and the benefits they provide – come in all shapes and sizes. It’s vital to ensure that you as a business owner or administrator of a company, fill out and file the proper Form 5500 since there are multiple varieties.

Form 5500 comes in three variations.

Form 5500

This form applies to most businesses operating in the public or private sector that provide retirement plans or benefits to 100 or more employees or participants.

It’s important to note that any company that fills out Form 5500 as a large business with more than 100 participants on the first day of the plan year, is required to have an audit as part of its filing process. These audits can be done by a third-party administrator, such as Squire, which has an experienced audit team standing by to help businesses with their tax filing needs.

Form 5500-SF

This shorter version applies to businesses with 100 or fewer participants in company-sponsored plans.

Form 5500-EZ

The shortest of the three, this form applies to one-participant plans for just the business owner and a spouse. But if the assets in the plan total less than $250,000 filing isn’t necessary.

Remember, participants include everyone who is a part of the employee benefits plans, which includes retirees, spouses, beneficiaries of deceased employees, and those who have separated from the company but are still receiving benefits for one reason or another.

A few types of businesses can be exempt from filing a Form 5500. Government or church organizations don’t need to worry about it, nor do those who have plans for the purpose of complying with applicable laws relating to unemployment, worker’s comp, or disability.

WHO FILLS OUT AND FILES FORM 550?

While Squire has helped clients prepare their Form 5500 before, doing so is typically the responsibility of the plan administrator. This can include a responsible person who works in their company’s HR, finance, or operations department.

It’s important to get Form 5500 filled out correctly and filed on time as there can be penalties for late submissions. And be sure to proofread before submitting, as any errors can result in the entire form needing to be redone.

If you have any questions or need any help getting your business’s Form 5500 or other tax or bookkeeping needs completed, please reach out to info@squire.com. For over 50 years and counting, Squire has been one of the top accounting firms in the Orem and Salt Lake City area and has been honored as one of the best firms in the country on multiple occasions.