5500 vs. 5500c/r

[Guest P A Weick]

You may want to check your plan document. Many prototypes now allow the Plan Administrator to forfeit the benefits of those he cannot reasonably find. You might also want to review some of the comments in a discussion which Laura Millwood started on 5/27/99 about dealing with lost participants.

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[Guest cascigm]

Regarding participant counting, I have a plan which execeeded 120 participants on 1/1/98. there are approx. 18 terminated participants from prior years 3 who we have been unable to locate and subsequently distribute.

Can I hold their balances in a suspense account and avoid having to have an audit and file long form 5500?

[Guest Robb Muse]

In completing the Form 5500 (or 5500 -C/R) how is the beginning of plan year participant count taken? Is the end of the prior plan year number used automatically or is this is the "base" to which you add new participants as of the first day of the plan year? For example ABC Corp had 114 participants as of 12/31/98. On 1/1/99, 7 employees became eligible. Is 114 or 121 used as the participant count for the beginning of the 1999 plan year? I would like to know what other firms are doing on a practical level since the instructions are not elaborate.

[Guest RS Vatalaro]

My understanding has always been that if someone is elig on 1/1 - they count (hence 121 not 114). Although I can't provide a cite, this theory has been repeated at many seminars I have attended.

[Guest FredReilly]

A new client brought this topic up today and I had to refer to the 5500 instructions to refresh my memory. This seems to be an administrative definition. The instructions for line 7 on the 5500 provide the details. Any participant with a benefit or the right to accrue benefit service are counted. Anyone who has not already forfeited remains in the count. I think that a "suspense account" doesn't change these definitions, or worse could disqualify a plan by allowing an allocated benefit.

[Guest ken CBT]

Here are the facts:

1) Plan terminated on 12/31/97 (the company assets was purchased by an unrelated third party).

2) A full 5500 was filed for 1997 plan year because plan had 350 participants on 1/1/97 and 395 as of 12/31/97.

3) All 395 were active participants

4) Only 75 had a balance as of 12/31/97.

5) No contribution was made for 1998.

5) Distribution did not begin until 1/99 (waiting for determination letter).

Questions:

1) What is the participant count as of 1/1/98 (75)?

2) Must the plan continue to file the full 5500 despite its participant count drop below 100 as of the beginning of the plan year because this is a terminated plan?

Would appreciate any reply.

[Tom Poje]

Way back when, there was a discussion on this on PIX (pension information exchange) There were two lines of thought:

1. add any new people as of 1/1 or

2. make sure your count at beginning of year equals count at end of last year.

the instructions seem to say 1, but a number of administrators said they did 2, because they were tired of the gov't 'audits' because the counts were different from one year to the next. Note: that doesn't say it is correct, I am simply reporting what some administrators claim they are doing.

I guess the best solution would be to have entry dates of 1/2 and 7/1. Then the count would stay the same and eliminate the nonsense.(or entry date is 12:01 am, but the count on the 5500 is at 1 second after midnight.)