Participant count and Schedule I

[BG5150]

I have a plan that we report the Schedule I on a cash basis. At the end of 2008, there are three people with actual accounts.

The ER owes a 2007 top heavy contribution which is going to go to those three people plus another two people (and those two people are terminated). We have not reported the contribution on the Schedule I as a receivable (since we are filing on a cash basis).

For the participant count on Form 5500, do I put 3 account balances or 5 in 7(g)?

[Bird]

Interesting. I think I would count them.

[pmacduff]

I agree with Bird. They are considered participants for the plan year for the active participant count but they are not included in the "participants with balances" count. Makes perfect sense, right?

[BG5150]

So you would count someone as a participant at the end of the year if they were expected to get an allocation?

For example, Ms. Ishkabibble becomes elgiible for the plan on 1/1/08. PS requirement is 500 hrs only (no last day rule). She terminates in Sept 08 with 1080 hrs, so she's gonna get the PS. I count her as a participant at the end of the year, but do not include her with the account balance people?

[pmacduff]

Yup - that is how I would report them. My logic is that they are still a "participant" even if they did not yet receive the allocation. Think of the 401(k) deferral only plan where the employee is eligible but not deferring. They are still in the participant count but they have no balance in the Plan.

On the other hand, if the Employer had not declared any profit share for the year (so there are no "receivables") I would NOT include such person in the participant's with balances count as of 12/31.

My 2 cents.....

(edited for wording...see underline)