Pursuant to section 29 CFR 2520.104-50, a plan administrator is not required to include the report of an independent qualified public accountant (“IQPA”) in the Form 5500 for the first of two consecutive plan years, one of which is a short plan year thereby resulting in a deferral of including audited financial statements until the second year. A short plan year is defined as a plan year of 7 or fewer months occurring in the event that:
- A plan is established or commences operations,
- Merged or consolidated with another plan,
- Is terminated or
- The annual date on which the plan year begins is changed.
Plan sponsors should complete Schedule H parts I and II as well as complete Schedule H Part III line 3d(2) on form 5500 for the first of the two consecutive years in order to defer the inclusion of the audit opinion. Unaudited financial statements and disclosures, as required by section 103(b) of the Act, must be attached to Form 5500 along with a statement that the report of IQPA will be attached in the subsequent year.
In the second year of the two consecutive years, Schedule H should be completed and Part III should indicate that the report of an IQPA is included. The audited financial statements accompanying the Form 5500 must meet the following conditions:
- Inclusion of a report of IQPA addressing both years.
- Inclusion of statements of net assets available for benefits, statements of changes in net assets available for benefits for the two consecutive years as well as any required accompanying schedules for both years.
- A statement identifying any material differences between the unaudited financial information relating to year one and the audited information relating to year one contained in the comparative financial statements.
- An explanation as to why one of the two plan years is a short plan year.
The examination of the by the independent public accountant relating to the first of the two consecutive years may be conducted at the same time as the examination serving as the basis for the opinion relating to the second year.
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For more information on this topic, please contact a member of Withum’s Employee Benefit Plan Services Team.
