80 120 rule in reverse

[bzorc]

Has anybody encountered or addressed the 80-120 rule in reverse? In 2005 plan had 240 participants as of the beginning of the year, requiring a Schedule H and certified audit. For 2006, certified audit is prepared, however, plan administrator just notified TPA that union employees have been improperly counted for 2006. Therefore, the 2006 Form 5500 shows 69 participants as of the beginning of the year, and the TPA has enclosed a Schedule H for the plan sponsor to file.

Question: Since the BOY count is 69, doesn't a Schedule I have to be filed? As the count is under 80, I don't believe you could attach a Schedule H (80-120 rule in reverse), even if you wanted to.

Any replies would be helpful.

[SRP]

My understanding is that the 80-120 rule is used to allow the plan to file the same schedule it did in the previous year. Therefore it works both ways.

For example - if you were at 79 in the prior year and filed a Sch I but then in the following year you were at 120 then you could still chose to file a Sch. I. If you are at 121+ then you don't have the option to file Sch. I for that year.

In reverse - if you were at 121 in the prior year and filed a Sch. H but then in the following year you were at 80 then you could still chose to file a Sch. H if you wanted to do so.