Participant

[Guest moltengater]

Company A has 200 participants in 2005. They are required to be audited for 2005. They only have 15 of the 200 who actaully have money in the plan so they decide they don't want to pay for administrative fees and audit fees for a plan for which such a small number of employees contribute.

They cease accrual of benefits on the plan as of 11-01-2005.

They DON'T change the plan year.

They get the audit done for 2005.

The plan is completely paid out 08-01-2006 - so they have a 2006 plan year from 01-01-2006 to 08-31-2006.

My question - does ceasing accrual of benefits as of 11-01-2005 mean that the 185 participants who never contributed to the plan are NOT participants as of 01-01-2006? They no longer have the ability to benefit under the plan in 2006.

Would the participant count on line 6 of the final 5500 show only 15 or 200? This means the difference between and audit and no audit for 2006.

[BG5150]

I'd say it's 15, since the other 185 (actaully all 200) are not eligible to contribute to the plan (or get an allocation).

[WDIK]

I do not think that merely ceasing benefit accruals would cause the 185 to stop being participants.

[BG5150]

They no longer have the ability to benefit under the plan in 2006

I do not think that merely ceasing benefit accruals would cause the 185 to stop being participants.

Wouldn't not having the ability to benefit under the plan cease their "participation"?

[Guest Pensions in Paradise]

From the Form 5500 instructions: Active participants include any individuals who are currently in employment covered by a plan and who are earning or retaining credited service under a plan.

Although the plan has been frozen, they are still considered participants.

[Bird]

You didn't say when the plan was actually terminated. If it was in 2005, then I'd say those with no accounts were effectively paid out and ceased to participate. Otherwise, I'd say they were still participants in 2006.

[Guest moltengater]

Plan term in 2006 as indicated in initial post.

If you ceased accrual in 2005 with intent to terminate and fully vest all participants as of date you cease accrual - are the "Active Participants" earning or retaining credited service under this plan? I can see this point but I might contact the DOL and see what there thoughts would be.

Thanks

[Bird]

Unless I missed it, the original post just said that the plan was completely paid out in 2006. To "terminate" in my book is to adopt some documentation saying the plan is terminated. Maybe your cessation of accrual documentation was close enough? (I'm not quite sure what cessation of benefit accruals means anyway in a 401(k) plan.)

Thinking about it a bit more, a plan can be deemed to be terminated - cessation of substantial and recurring contributions, e.g., and I guess your "cessation of benefit accruals" might qualify; maybe that's stretching it, maybe not...