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TIAA-FAQ's - Terms with Balances

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In reading TIAA's Auditor FAQ's, they indicate that many plan sponsors have concluded that terminated participants with balances may be excluded from the participant counts (and therefore line 6c on the 5500) based on the instructions for line 6c, which says you may exclude anyone whose benefit is guaranteed by the insurance, company etc.

Has anyone been using this position?

TIAA's write up is at the bottom of page 9 of the attached document.

The crux of it is this:

After a participant separates from service, the employer generally has no obligation to make further contributions and will not control when the participant receives distributions. Instead, the terminated employee will exercise his or her own rights under the terms of the TIAA and/or CREF annuity contracts. In effect, the separated participant is in the same situation as if he or she had received an in-kind distribution of an annuity contract from a trusteed pension plan. Since this is the case, a number of employers take the position that a participant who has separated from service is no longer a plan participant. Since there is no guidance from the Department of Labor to the contrary on this point, we believe that excluding separated participants is an acceptable approach. Note, however, that if the separated participant has account balances in mutual funds under a trust or custodial account, the employer cannot take this position and must treat the separated participant as a plan participant. The instructions to the 2009 Form 5500 indicate that the “other retired or separated participants entitled to future benefits” category does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.


Austin Powers, CPA, QPA, ERPA

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