improperly excluded employees and the IQPA

[Gudgergirl]

Does anyone know of any guidance or has anyone ever experienced a situation in which :

1. a plan improperly excluded employees

2. Plan qualifies for small plan waiver of audit requirement

3. Plan corrects under EPCRS to make imprerly excluded employee whole

4. by adding the improperly excluded employees the plan no longer qualifies for the small plan audit requirement?

For example:

Plan has 92 participants at the end of 2008 and terminates.

36 employees who were improperly excluded at the time of the plan termination become 100% vested in a benefit. Plan files under EPCRS to correct this defect. Does Plan need to file a Schedule H for 2008?

[Mike Preston]

The audit requirement is determined as of the first day of the year, not the last, isn't it? How many of your 36 were participants as of the first day of the year? Speaking just about 2008, of course. Somebody else will have to comment on the requirement for an audit in 2009 as I don't have time to look it up at the moment.

[jpod]

I am assuming that they were improperly excluded because of faulty operation, not because of a bad document, in which case would they not be included in the particpant head-count as of the first day of the plan year?

[Gudgergirl]

I am assuming that they were improperly excluded because of faulty operation, not because of a bad document, in which case would they not be included in the particpant head-count as of the first day of the plan year?

yes, they were excluded because of faulty operation.

[Mike Preston]

I'm not sure what is being said here. A participant excluded improperly is a participant. If said participant was a participant as of the beginning of 2008, said participant counts towards the 120 participant threshold. Isn't it that simple? You can't get out of an audit by improperly excluding participants.