Seasonal employees in a 401k plan

[Guest scott34]

Would a company that has mostly seasonal workers ever be required to have their 401k plan audited if their peak employment is in the summer. I know in order to have a audit you must have over 100 eligible participants at the beginning of the plan year. This plan has a calander plan year so the number of participants they have in January is usually well below 100 but during the summer they employ over 300 people and eligibility for the plan is 18 years of age and 1 hour of service so almost everyone is eligible.

[K2retire]

Would a company that has mostly seasonal workers ever be required to have their 401k plan audited if their peak employment is in the summer. I know in order to have a audit you must have over 100 eligible participants at the beginning of the plan year.

Do all those seasonal employees actually get their balances withdrawn before the end of each year? Terminated participants with account balances are included in the count.

[Guest scott34]

Would a company that has mostly seasonal workers ever be required to have their 401k plan audited if their peak employment is in the summer. I know in order to have a audit you must have over 100 eligible participants at the beginning of the plan year.

Do all those seasonal employees actually get their balances withdrawn before the end of each year? Terminated participants with account balances are included in the count.

Very few of them actually participate. There is only about 10 employees, mostly full time, that make contributions and have balances.

[rcline46]

Hmmm, in a situation like this, snapshot testing is NOT an option. Unless the 10 participating employees are all NHCEs, I see a failed test, unless it is a matching Safe Harbor.

[ERISAnut]

Hmmm, in a situation like this, snapshot testing is NOT an option. Unless the 10 participating employees are all NHCEs, I see a failed test, unless it is a matching Safe Harbor.

Not necessarily. If they never meet a one year service requirement due to early entry, they may be tested separately (which automatically passes). This separate testing would continue until they actually satisfy one year of service.

[jpod]

I am confused as to why there is any discussion of snapshot testing here, as the question pertains to the ERISA audit threshold, and the facts suggest that nobody is being excluded from participation. Anyway, in determining whether you have 100 or more participants at the beginning of the plan year, can't/shouldn't you use the same head counting as you use for Line 7 on the 5500?

[jpod]

Never mind above comment. Now I see that rcline was making an observation about ADP testing; so sorry.

[BG5150]

The audit requirement generally starts with 100 participants as the start of a given plan year. So if these season people get terminated before the end of the year, they probably aren't ee's on day 1, so I don't see a problem. Also, if the plan has been filing a Schedule I for the past year, the threshold goes up to 120.

Keep in mind, the Day 1 "participants" are eligible participants (with or without acct bals)+ any terminated ee's accounts with balances. This does not include beneficiary accounts or QDRO accounts, but would include an ee who may not be eligible for the plan, but has a rollover balance.