Switching from large filing to small

[Guest Powers]

I have a client who filed as a large plan in 2002 (133 - Line 6). Line 6 for the 2003 plan year is 108. Can the client switch to a small plan filing? The rules and exceptions, as I understand them, were specifically designed for a plan going from small to large and not the other way so I am having difficulty determinig which way the client must file.

Thanx in advance!

[pmacduff]

Client cannot change to small plan filing until the participant count drops below 100 (once the plan has filed as a large plan). Once it does, they can file as a small plan until the count goes above 120. Remember, too that it is the beginning of the plan year count. I have a client in this same situation who will be able to save lots of $ not needing the financial audit! hope this helps.

[R. Butler]

Plan still is a large plan.

You are thinking of the 80/120 rule. Simply the 80/120 rule states that if the participant count is between 80 & 120, the plan can file in the same manner as the prior year (i.e. as a small plan or large plan). So in your case plan must file as a large plan until participant count falls below 100. Even if participant falls below 100, the plan sponsor could continue to file as a large plan until participant count fell below 80. (But who would do that?)