ERISA Audit Requirements: The 100+ Participant Rule

Introduction

Many plan sponsors don’t realize when they’re subject to an ERISA audit — until the filing deadline is looming. Retirement plans with 100 or more eligible participants accounts at the beginning of the plan year are often required to file audited financial statements with their Form 5500. But the audit requirement isn’t always as clear-cut as the number 100. With exceptions, plan types, and reporting nuances in play, it’s easy to overlook compliance triggers.

This post provides a clear, practical explanation of when an audit is required, what Form 5500 entails, and what plan sponsors should review each year to stay compliant.

The 100+ Participant Threshold: What It Really Means

The most common trigger for an Employee Benefit Plan (EBP) audit is the “100-participant rule.” If your retirement plan’s census has 100 or more eligible participants on the first day of the plan year, you’re generally required to obtain an independent audit under the Employee Retirement Income Security Act (ERISA).

But the term “eligible participants” can be misleading. It includes:

Employees who are eligible to participate, whether or not they contribute
Active participants with account balances
Separated employees with remaining balances
Beneficiaries of deceased participants

This broader definition often catches sponsors off guard — especially when employees leave but keep funds in the plan.

Form 5500: Where the Audit Requirement Comes into Play

Form 5500 is an annual filing required by the Department of Labor (DOL), the IRS, and the Pension Benefit Guaranty Corporation (PBGC). For plans with 100+ eligible participants, a Schedule H filing is typically required, which includes audited financial statements.

If you file a Schedule I (for small plans under 100 participants), an audit may not be needed — unless you cross the threshold mid-year or fail to meet other exemption criteria.

Plans filing Form 5500 must:

Accurately report the number of eligible participants
Identify whether an audit is included
Select the appropriate filing schedule (H or I)

Misclassifying your plan size or filing schedule is a common audit red flag.

Plan Types That Can Trigger Audits

Most ERISA audits involve the following types of retirement plans:

401(k) and 403(b) Plans
Profit-Sharing Plans
Defined Benefit Pension Plans
Employee Stock Ownership Plans (ESOPs)

Some welfare benefit plans may also require audits, such as those offering:

Medical, dental, vision, life, or disability benefits
Severance pay

Audit requirements depend on plan funding, size, and whether the plan is fully insured, unfunded, or self-insured. Sponsors should review all plan types annually with their CPA or advisor.

The 80-120 Participant Rule: An Exception Worth Knowing

If your plan has between 80 and 120 eligible participants, you may qualify to continue filing as a “small plan” — if you filed as a small plan in the previous year. This exception is meant to prevent unnecessary audit requirements due to small year-over-year fluctuations.

Example: If you had 95 eligible participants last year and 110 this year, you may still file as a small plan — and avoid the audit — as long as all other conditions are met.

But once your count reaches 121, an audit is required.

Annual Review Checklist for Sponsors

To avoid late discovery or audit penalties, plan sponsors should:

Count eligible participants on the first day of the plan year
Confirm plan type and funding structure
Review prior year Form 5500 filing status
Discuss audit requirements with a qualified CPA
Coordinate early with recordkeepers and third-party administrators

Conclusion

Understanding whether your plan triggers an ERISA audit isn’t just a compliance issue — it’s a fiduciary responsibility. By reviewing participant counts, filing categories, and plan types each year, sponsors can reduce risk and stay ahead of reporting deadlines.