Participant Count, Small Balances

[R. Butler]

Plan has been a large plan filer for years. The recordkeeper holding the assets charges a check fee which is not waived for nominal balances. At the end of 2012 there were 4 or 5 terminated participants for whom a small true-up is due or who received a nominal forfeiture reallocation. In each case the allocation is less than the check fee. Jumping forward to 2013, this plan will be right around 100 participants at the beginning of the year. Is there a plausible argument that the 4 or 5 terminated participants can be excluded from the beginning of the year participant count? Again these participants will never see that money due to the check fee.

Thanks in advance for any guidance.

[rcline46]

You must 'distribute' to get them off the list, otherwise they will be counted.

[ETA Consulting LLC]

Correct. This has always been an area where the client's best interests may have not been served. When you're skating around the large and small plan participant count limits, you don't want the additional count when all that was needed was to 'follow the written terms of the plan'. This would include forcing out for the $5,000 and under; and timely processing distributions when requested.

Not being critical, but just a statement to add a little insight into how clients can save tons of $$$ by ensuring things are done timely. This was emphasized in these forums tons of time over the past; plus one

[ESOP Guy]

Not trying to point out the obvious but just in case....

If the plan had been a small plan in previous years don't forget the 80/120 rule. If they are right at 100 they might not still need an audit.

Edit:

I guess I didn't read the orginal question very well. He does say it has been a large plan for filing for years.