Form 5500 EZ--Are beneficiaries counted for the plan?

[Guest johncpa]

I have a sole proprietor profit sharing plan, with the husband and wife as the only participants. Accordingly, the plan is not subject to ERISA and it qualifies to file From 5500 SF

The following year the wife dies and leaves her plan benefit to her three children.

The plan now still has only a single participant but it is also paying out the wife's benefits to the children over five years.

This type of situation must be very common, obviously because sooner or later the proprietor may die and only beneficiaries will be left in the plan. Also, almost every plan participant designates a beneficiary for their benefit during their life time, and some day the plan will likely provide a benefit to that beneficiary.

Page 7 of the instructions to From 5500 SF provides one of the requirements to file the form is: " 2) The plan does not provide benefits for anyone except you, or your and your spouse..."

My question is: In a sole proprietor plan, where the owner as the only participant, and the plan is also paying out benefits to a nonparticipant beneficiary, is the plan still not subject to ERISA and can it continue to file Form 5500 SF?

It seems to me, that by the participant simply designating a beneficiary during her life time, the plan is providing a benefit to the beneficiary . However, I would not expect this designation during the participant's life time to preclude the filing of Form 5500 SF. So, if the participant dies and is replaced by three beneficiaries who had for a number of years already been entered in the plan, but now will actually receive benefits, the plan should be able to continue to file Form 5500 SF because beneficiaries are not participants.

What do you think? Does anyone have an authority for this issue?

[Bird]

I can't prove it but my take is that it is still the spouse's account, and eligible for EZ or SF-1 participant filing.

[jpod]

Should still be able to file an EZ or an SF as a "one person" plan. The underlying authority for the one person plan concept is a DOL regulation that says a plan without employees is not subject to Title I of ERISA. An owner and the owner's spouse are treated as non-employees for this purpose. Clearly the beneficiaries are not employees by virtue of their status as death beneficiaries. Therefore, it looks to me like it is still an exempt one person plan.

[Calavera]

And you still show 2 participants (husband and deceased spouse)