Form 5500 Line 7h

[Belgarath]

Question has come up for two situations, and should these people who terminated during the plan year be included on Line 7h.

1. 0% vested with an account balance.

2. partially vested with no account balance.

The instructions are not, to me at least, as clear on this as I'd like. # 1 seems pretty clear that the answer is yes, should be included. # 2 seems a little more debatable. I'd still answer yes, but wondered what other people thought/did on this?

Thanks.

[WDIK]

For scenario 1, I agree that the participant should be counted on line 7h.

For scenario 2, I would lean toward the argument that participant would not need to be counted because such participant has no accrued benefit. The line description indicates to count "participants that terminated employment during the year with accrued benefits..."

I would not be overly concerned if such a participant were counted, however.

[Guest anagpal]

No, i dont think both these categories should be included in line 7H, as the instruction clearly say that include only those who are terminated with accrued benefits but less than 100% vested.

for option 1

vesting is 0%.

for option 2

no accrued benefits.

hence, both shudn't be included.

[WDIK]

anagpal:

I think that we agree that you report on line 7h participants that:

1) terminated employment during the year;

2) with accrued benefits;

3) that were less than 100% vested.

I assume that you agree conditions one and three are met in scenario 1. If my assumption is correct, then we must disagree whether or not the participant had an accrued benefit. It seems to me that the second condition is met since the participant had an account balance. Could you please elaborate your position?

[Calavera]

Instruction says to include any individual who terminated employment ... and/or received a cash distribution or deemed cash distribution of his or her accrued benefit.

In case 1 you have 0% x $X = $0 (deemed cash distribution)

In case 2 you have X% x $0 = $0 (deemed cash distribution)

I think both cases should be reported on line 7h.

[WDIK]

I have seen language in plan documents regarding deemed distributions that refer to participants that are nonvested in their account balance, but I don't ever remember seeing such sections refer to participants with no account balance.