80/120 rule

[K2retire]

I've now been told what I believe to be wrong information by 2 record keepers, causing me to question myself.

If a plan has used the 80/120 rule to delay audit requirements at some point in the past, must they continue to be audited until they fall below 80 participants or is it just below 100?

[GMK]

http://www.dol.gov/ebsa/pdf/2010-5500inst.pdf

page 7

A plan with fewer than 100 participants can file as a small plan.

and from long ago:

http://benefitslink.com/boards/index.php?/topic/16331-80-120-participant-rule-question/

[BG5150]

100. If they want, they MAY continue to file as a large plan.

Below 80 they cannot file as a large plan and MUST file as a small plan.

[Andy the Actuary]

My understanding is that once Plan falls below 100 Participants, it may file as a small plan so long as count does not exceed 120. If you file as a small plan, no audit is required. Example.

2008 115 Participants (and always 100 prior) - large plan

2009 99 Participants -- small plan but may file as a large plan (who wants to?)

2010 92 Participants -- may continue to file as a small plan

2011 108 Participants -- may continue to file as a small plan

2012 117 Participants -- may continue to file as a small plan

2013 121 Participants -- must file as a large plan

2014 115 Participants -- must file as a large plan

Please call me out if you disagree

[K2retire]

Thanks, that's exactly what I thought. But using Andy's examples both of these large record keepers are telling clients that the result would be that all of those years must be filed as a large plan if they had initially waited until exceeding 120 participants to begin filing as a large plan.

[My 2 cents]

In Andy's examples, remember that to invoke the 80/120 rule to file as a small plan while over 100, you have to have filed as a small plan the year before.

Is it my imagination, or would a service provider possibly not know what they are talking about if they say that if you had invoked the 80/120 rule in the past, you cannot file as a small plan without falling below 80, even if you are below 100 now?

It was my understanding that if you are now under 100 participants, irrespective of your history, you may now file as a small plan. Where does it say otherwise?

[Andy the Actuary]

Thanks, that's exactly what I thought. But using Andy's examples both of these large record keepers are telling clients that the result would be that all of those years must be filed as a large plan if they had initially waited until exceeding 120 participants to begin filing as a large plan.

They may want to be asked how they explain their position from the 80/120 rule posted in the 5500 instructions because no one else seems to be interpreting the rule their way.