1/1/2010 5500 Count

[BeanCounterBlues]

Plan Sponsor adopts resolution during 2009, to terminate 401k plan. Employees will be able to salary defer on all pay periods through the end of 2009, w/ no 2010 pay periods eligible to be deferred from. Early 2010 plan sponsor plans to wind down affairs and process the distributions.

Does an employee who met the eligibility req'ts prior to 12/31/09, but who has never had an account balance, count as of 1/1/2010 for the 2010 5500.

Noone can "participate" in 2010. I realize those w/ balances certainly do count for the 5500.

If yes, the plan count will be high enough to require an independent audit (the plan sponsor would like to avoid the expense if possible). I'm not locating anything definitive that answers this question. If anyone has any thoughts I would be very appreciative, thank you.

[K2retire]

Did the employees who met eligibility prior to 12/31/2009 also pass a plan entry date in or before 2009? Or are you referring to those who would have entered the plan 1/1/2010 absent a plan termination?

[BeanCounterBlues]

Did the employees who met eligibility prior to 12/31/2009 also pass a plan entry date in or before 2009? Or are you referring to those who would have entered the plan 1/1/2010 absent a plan termination?

Actually both, sorry for not being clear. There are many eligibles who chose to never defer, they passed an entry date prior to 12/31/09. Do I have to count them for 1/1/2010 count purposes?

Also - there are several people who would have (I mean will) become elig on 1/1/2010. But the Plan Sponsor has eliminated the ability to defer from 2010 pay periods - so those folks never would have had a deferral opportunity based on the circumstances.

Thank you for your help.

[Guest Sieve]

If the resolution terminates the plan as of a date in 2009, then there should be no new participants as of 1/1/2010 (although it would have been clearer if the termination amendment specifically eliminated new participants on a prospective basis after the date of plan termination). But, those who were participants prior to the date of plan termination, whether or not they ever deferred, would, I believe, continue to be considered plan participants.

[rcline46]

If the plan were subject to audit in 2009, then check the rules about including the short 2010 audit in the 2009 audit. I would terminate the plan at the end of 2009, and that would remove everyone without a balance for 2010.

[Kevin C]

If the plan's termination date is in 2009, I agree those with zero balances would not be participants at 1/1/2010. The plan's deemed cashout language for those with zero balances may not address the situation. But, they are eligible for a distribution on the termination date and are not entitled to any future payments. I'd say that means they are considered as paid on the termination date.

[BeanCounterBlues]

Thank you all for your helpful replies. The resolution that was adopted by the Board during 2009, clearly states that the intended termination date is 12/31/09. It also clearly states in a separate sentence contained in the resolution, that the Plan Sponsor will NOT permit anymore contributions after 12/31/09 pay periods have closed.

The plan's participants (both contributing and non-contributing) have been notified of this in writing and verbally via meetings etc - eg the communicatons have been many and the position of the employer has been made very clear w/ ample time for employees to decide where to place their funds (cash out, IRA etc).

Does the language of the resolution (and the plan sponsor's responsible behavior) solidify a possible position that those zero balance people can excluded from the 1/1/2010 count or not make any difference? I realize in the end the Plan Sponsor and fiduciary have to make the decision they are most comfortable w/ based on the facts and circumstances. Thank you again for your opinions.