I have been asked a question on a 401(k) plan.

A plan has 1,000 eligible employees BUT only 60 defer. Does this plan require an audit because they have over 100 eligible OR can they bypass the audit due to the limited number participating.

My uninformed opinion is that the audit is required.

Thanks for any and all opinions.

From the Form 5500 instructions (emphasis added):

Active participants include any individuals who are currently in employment covered by a plan and who are earning or retaining credited service under a plan. This category includes any individuals who are eligible to elect to have the employer make payments to a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under a plan.

I'm with your uninformed opinion.

See also.

The audit is absolutely required.