Participant

[Guest Rutager]

Facts:

* A 12-31 year end 401(k) plan is amended to cease accrual of benefits on 12-01-2007 - with the intent to terminate the plan.

* The final distributions for the plan occur on 07-01-2008.

Question:

Are employees who were considered participants but never had any balance in the plan becuase they elected not to participate and the employer never made contributions on their behalf - still active participants as of 12-31-2007? What about 01-01-2008?

Situation - plan had 650 participants in 401(k) but only 40 ever had a balance. So for the 5500, is an audit required or not for 2008 based on the definition of "Participant" in line 6 of the 5500 instructions. Should the 610 or so participants who never had a balance and would never have a balance be considered "Active" participants at 12-31-2007 or 01-01-2008?

Are they still covered by the plan after the amendment is signed on 12-17-2007?

Are they earning service under the plan?

Are they retaining service under the plan?

This is an expensive determination for the plan sponsor and one I cannot find clear guidance on. Any suggestions would be appreciated.