Counting Participants in a Frozen Plan

[12AX7]

After a Defined Benefit plan is frozen, can the number of participants increase for "newly eligible" employees after the freeze date? My concern is for the extra funding required in the plan when the participant count exceeds 100 participants. The "new participants" would not have any accrued benefit since the plan is frozen, so are they still counted? Thanks.

[david rigby]

Depends on how well the freeze amendment is written. Normally, "freeze" means no new entrants.

[Guest DBtech]

Usually an employee with zero accrued benefit is not considered a "participant" (see below.)

§ 4006.6 Definition of ‘‘participant.’’

(a) General rule. For purposes of this

part and part 4007 of this chapter, an

individual is considered to be a participant

in a plan on any date if the plan

has benefit liabilities with respect to

the individual on that date.

[david rigby]

Note that that is a PBGC reg, not IRS.

[12AX7]

The freeze amendment states that no participants shall accrue additional benefits. From that perspective, could one argue that the plan could have new participants for purposes of the additional funding required on the FSA (> 100 participants). Without the addition of the new participants, the plan would be <100.

[Blinky the 3-eyed Fish]

One could attempt to argue that or one could re-draft the amendment to be specific so one doesn't have to argue anything because it is clear to everyone. By the way, from the wording of the amendment you shared, I wouldn't attempt to argue the position they aren't participants for purposes of additional funding.