Our client, a 501©(3), has a 403(B) plan and a 401(a) plan. The employees may make contributions into the 403(B) plan while the employer makes matching contributions and discretionary contributions into the 401(a) plan. These are separate plans. They have more than 100 particpants and have been filing the 401(a) as a large plan with an audit. Is this correct? They have a new TPA who is advising them that because it is a 401(a) plan they are exempt for the audit requirement. I realize that the 403(B) plan is exempt from audit but I'm unclear on the 401(a) plan. Any help would be appreciated and cites would be welcomed!

I have yet to see a 401(a) plan with more than 100 lives exempt from the audit requirement. Ask the TPA for some sort of citation backing up their claim.

You should probably also consider that the 403(B) plan is subject to ERISA because of its pairing with the 401(a) plan. Sounds to me like that may have been overlooked or misunderstood.

Actually, both the 403(B) plan and the 401(a) have been audited together because they are paired. For the 5500 filing, the 401(a) plan has been reported as a large plan with audit attached. The 403(B) plan we have subjected to the more limited type of reporting as specified in the instructions. I think we are on the right track which is why I was confused when the new TPA said the 401(a) did not need an audit.

Maybe the plan administrator means to say that the 403(B) arrangement doesn't need to be audited... !

Alison,

Am a CPA, mostly tax, but do EBP audits simply because they are tax-driven monsters.

My belief:

1) Perhaps the 401(a) plan is invested solely in insurance contracts covering the benefit so no filing requirement (highly unlikely).

2) Perhaps the TPA is making an erroneous calculation of "participants", as it is a nebulous term (sometimes) and subject to different interpretations especially with regard to terminated/retired employees (moderately unlikely).

3) Perhaps the TPA doesn't know what he or she is talking about (very likely).