Audit Requirement - Accured Distributions

[BFree]

A plan has terminated and will begin paying out participants next week. The plan requires an audit for 2001.

Can the participant count on the 2001 Form 5500 reflect accured distributions (checks cut in 2001 but not cashed by 12/31/01)? The trustee would like to bring the participant count down to under 100 so that an audit is not required for 2002.

If the answer is "Yes," do you have a response or citation for the auditors who say that accrued distributions cannot be reflected in the participant count?

Any guidance is appreciated.

[JanetM]

Since the plan uses the accrual method of accounting - you must count as distributions all checks issued in 2001. The date on the check will determine the year paid. Not the date the check is cashed.

[JohnCheek]

I agree with Janet, once the check is issued, the check is no longer a plan asset, and I would not count that person as a participant. This would be the case whether the plan was on the cash basis or the accrual basis.

The only exception-- if a participant could not be located, I could not treat an "issued check" as a distribution.