Form 5500 Number Participants

[Guest 401kproman]

Does line 7c include employees who have left the company and decide to leave their balances in the plan, such as in a 401(k) plan.

I am getting concerned that as more and more of these people do not opt to get paid or rollover, the participant count, which determines whether the plan is "small" or "large" and thereby also dictates whether an auditor's report will be needed, will cross the 100 level.

[pmacduff]

Yes, terminated employees with balances are still "participants entitled to future payments" for purposes of 7c. Perhaps you can get the client to take a more aggressive approach to getting former employees paid out, ie., sending out letters more often reminding them that they are eligible for distribution. I find many former participants want the monies under their own control and finally realize that they will have more control if they roll the balance to an IRA. Also, distributions are much easier from their IRA in the event of an emergency, might take a lot longer from the Qualified Plan, if even available.... just some ideas.

[Guest 401kproman]

Thanks. I thought so but had hopes that something might have changed.

Now that plans are getting so attractive with a wide choice of funds and brokerage windows, more and more participants would rather leave their money in the plan where in many cases the company picks up any costs. In addition, with the new cash-out rules having employers set up IRA accounts for participants with balances between $1,000 and $5,000, it becomes a burden to seek out these IRA relationships, particularly when you can't locate the person anymore.