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Form 5500-SF Part II Line 5(a)-(e)


AdKu

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Background information: an employee become a participant 07/01/2018 and terminated 08/18/2018 with only 1 year of service for vesting purposes. This participant allocated employer contribution for the 2018 plan year, and the employer contribution was made in March 2019.

Question: Is this 0% vested and terminated participant should be in the 2018 participant count for form 5500-SF purposes?

5(b) Total number of participants at the end of the plan year

5(c) Number of participants with account balances

5(e) Number of participants that terminated employment during plan year with accrued benefits < 100% vested

Generally speaking, is 5(e) applicable to 401(k)/profit sharing plans?

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Thank you, RatherBeGolfing.

Line 5(c) mention participant with account balance.

The only contribution he has in his account is originated from the 2018 employer contribution allocation. Since he is 0% vested, the 2018 employer contribution allocation will be forfeited.

Is this safe to assume this subsequent event will not prevent him from being count as a participant for Line 5(c) and line 5(b) purposes?

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1 hour ago, AdKu said:

Thank you, RatherBeGolfing.

Line 5(c) mention participant with account balance.

The only contribution he has in his account is originated from the 2018 employer contribution allocation. Since he is 0% vested, the 2018 employer contribution allocation will be forfeited.

Is this safe to assume this subsequent event will not prevent him from being count as a participant for Line 5(c) and line 5(b) purposes?

Correct.  A 0% vested participant is included in the count for 5(b) and 5(c) until the non-vested balance is forfeited.

 

 

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Many plans specify that a 0% vested participant is deemed to have received a total distribution immediately upon termination. In that case you could reasonably not include them in the participant count, even if their account has not been physically moved to forfeiture by the end of the year. However it's probably easier for recordkeeping purposes to continue counting them as a participant until their account is physically moved to forfeiture.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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Yea you are right, if the plan has a deemed cash out provision, a nonvested participant is deemed to have received a distribution as of the termination date

 Edit:  In my document it is in the forfeiture section

"For purposes of this Section, if the value of a Participant's vested Account balance is zero upon Termination, the Participant shall be deemed to have received a distribution of such vested Account"

 

 

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the instructions on the form 5500 for item 5 are as follows.

which category does a 0% vested terminee fall into? certainly not 2, 3 or 4.

1 is for those currently employed . I suppose you could argue they are covered by (a) if they did not have a break in service, but even (b) does not include those who have a deemed distribution

 

 

  1. Active participants (i.e., any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan). This includes any individuals who are eligible to elect to have the employer make payments under 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 the plan. This does not include (a) nonvested former employees who have incurred the break in service period specified in the plan or (b) former employees who have received a "cash-out" distribution or deemed distribution of their entire nonforfeitable accrued benefit.
  2. Retired or separated participants receiving benefits (i.e., individuals who are retired or separated from employment covered by the plan and who are receiving benefits under the plan). This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
  3. Other retired or separated participants entitled to future benefits (i.e., any individuals who are retired or separated from employment covered by the plan and who are entitled to begin receiving benefits under the plan in the future). This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
  4. Deceased individuals who had one or more beneficiaries who are receiving or are entitled to receive benefits under the plan. This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the beneficiaries of that individual are entitled under the plan.
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21 minutes ago, Tom Poje said:

the instructions on the form 5500 for item 5 are as follows.

which category does a 0% vested terminee fall into? certainly not 2, 3 or 4.

1 is for those currently employed . I suppose you could argue they are covered by (a) if they did not have a break in service, but even (b) does not include those who have a deemed distribution

 

 

  1. Active participants (i.e., any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan). This includes any individuals who are eligible to elect to have the employer make payments under 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 the plan. This does not include (a) nonvested former employees who have incurred the break in service period specified in the plan or (b) former employees who have received a "cash-out" distribution or deemed distribution of their entire nonforfeitable accrued benefit.
  2. Retired or separated participants receiving benefits (i.e., individuals who are retired or separated from employment covered by the plan and who are receiving benefits under the plan). This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
  3. Other retired or separated participants entitled to future benefits (i.e., any individuals who are retired or separated from employment covered by the plan and who are entitled to begin receiving benefits under the plan in the future). This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
  4. Deceased individuals who had one or more beneficiaries who are receiving or are entitled to receive benefits under the plan. This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the beneficiaries of that individual are entitled under the plan.

If the document does not have a deemed cash-out provision, an argument can be made for 3 above (or 6 c on the form 5500).

This is what Janice said on it in the 5500 manual a few years ago. 

 

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  • 2 years later...

Form 5500-SF Part II Line 5(e) reads as follows: "Number of participants who terminated employment during the plan year with accrued benefits that were less than 100% vested..."

Is this safe to assume, Line 5(e) doesn't apply to a 401(k) Profit Sharing Plan as there is not going to be accrued benefits?

Relius Government forms accepts when I enter any number including zero or leave it blank.

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1 hour ago, AdKu said:

Is this safe to assume, Line 5(e) doesn't apply to a 401(k) Profit Sharing Plan as there is not going to be accrued benefits?

Accrued benefit means benefice the participant has earned.  Not if there is an accrual due but not deposited yet.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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