Auditor's Report in 1st Plan year?

[Guest IRISH79]

We have a new 401(k) plan effective 1/1/2006. Participants were eligible to make contributions until 7/1/2006. As of 7/1/2006 there were 100 participants. Is an auditor's report required to be filed with the initial Form 5500? Technically, as of the first day of the plan year there were no plan participants?

[WDIK]

First, are you certain that there were no eligible participants on 01/01/2006? It is possible for employees to be considered participants in a plan even though they are not deferring.

Second, the Form 5500 instructions indicate the following (emphasis mine):

Generally, a return/report filed for a pension benefit plan or welfare benefit plan that covered fewer than 100 participants as of the beginning of the plan year should be completed following the requirements below for a ‘‘small plan,’’ and a return/report filed for a plan that covered 100 or more participants as of the beginning of the plan year should be completed following the requirements below for a ‘‘large plan.’’

Use the number of participants required to be entered in line 6 of the Form 5500 to determine whether a plan is a “small plan” or “large plan.”