How to answer Lines 6a and 10b of 5500-SF

[Oh so SIMPLE]

I have a plan that made a distribution to a participant who is actively employed and below the normal retirement age. A VCP application has been made, and is yet pending. I'm preparing the Form 5500, and two of the questions trouble me a bit as to how I ought to answer.

One is line 6b. It is checking for the eligibility for the small employer exemption to the annual audit requirement. It asks, "Were all of the plan’s assets during the plan year invested in eligible assets?" Part of the assets properly belonging to the plan were for a time during the year held by a plan participant who was not entitled to it. Is that considered an investment in ineligible assets?

The other concern is line 10b. It is probing about the possibility of a prohibited transaction, Title I style. "Were there any nonexempt transactions with any party-in-interest? Since this was not a proper distribution being that it was premature, was the payment to the participant a nonexempt transaction with a party-in-interest?

[Guest Ohio City]

I have a plan that made a distribution to a participant who is actively employed and below the normal retirement age. A VCP application has been made, and is yet pending. I'm preparing the Form 5500, and two of the questions trouble me a bit as to how I ought to answer.

One is line 6b. It is checking for the eligibility for the small employer exemption to the annual audit requirement. It asks, "Were all of the plan’s assets during the plan year invested in eligible assets?" Part of the assets properly belonging to the plan were for a time during the year held by a plan participant who was not entitled to it. Is that considered an investment in ineligible assets?

The other concern is line 10b. It is probing about the possibility of a prohibited transaction, Title I style. "Were there any nonexempt transactions with any party-in-interest? Since this was not a proper distribution being that it was premature, was the payment to the participant a nonexempt transaction with a party-in-interest?

What approach did you take responding to Line 6a and 10B. Did you responding the negative because the VCP application was pending.