Form 5500/Severance Plan

[Guest ladler]

I am filing a Form 5500 for a discretionary severance plan (that is a welfare benefit plan). No employees received severance benefits in 2002. For the 5500, is the number of participants (1) the number of employees employed by the employer (even though no employee received any benefits from the plan) or (2) the number of employees who received severance benefits for the year.

[Guest CMC]

Did you find an answer to your question?

It is my understanding that for welfare plans the number of participants is determined by DOL Reg. 2510.3-3(d), which says an individual becomes a participant on the earlier of:

(A) The date designated by the plan as the date on which the individual begins participation in the plan;

(B) The date on which the individual becomes eligilble under the plan for a benefit "subject only to the occurrence of the contingency for which the benefit is provided"; or

© The date on which the indivudal makes a contribution to the plan, whether voluntary or involuntary.

Seems like © is inapplicable to severance plans and (A) wouldn't capture employees still on the payroll. With respect to (B), seems to me that if the plan is drafted so that, in order to be eligible, employees must not only be involuntarily terminated as a result of a reduction in force but also execute a release, that, arguably, their simply being on the payroll is not enough to cause you to have to count them as participants.

Of course this is only my reading of the regulations. I've had a quick look for DOL guidance re this but haven't found any. Wonder if they've said anything informally re this.