Form 5500-EZ for Partners Plan

[Doghouse]

We are consulting for a company that sponsors two 401(k) plans - one for the partners and one for the non-partners. The partners' plan has been filing form 5500-EZ, which I think it is allowed to do, even though there are 80 partners. Two questions:

1. One of the partners has a QDRO and his account has been split into one account for him and one for the ex-spouse. Does the account for the ex-spouse make the plan ineligible for an EZ filing?

2. I haven't seen too many of these before (EZ filing for large number of partners). Is it true that even if the partner count got to over 120, they wouldn't have to get an accountant's opinion on this plan?

[Peter Gulia]

About Q2, consider that a plan that never covers an employee might not be an ERISA-governed plan. See 29 C.F.R. 2510.3-3.

[Doghouse]

Thanks Peter, that did occur. Any specific thoughts about my questions? Your input is always good.

[NJ Mike]

Don't know if this helps but for the past few years the Form 5500 and Form 5500-SF instructions have included the following in the line for the participant count:

;

For pension benefit plans, "alternate payees" entitled to benefits under a qualified domestic relations order are not to be counted as participants for this line.

Not sure how this pertains to Form 5500-EZ but I would think the definition of a participant would be consistent.

[Doghouse]

That is a very good point, Mike. Thank you!

[Peter Gulia]

ERISA section 3 [29 U.S.C. 1002] includes definitions for employee organization (4), employee (6), participant (7), beneficiary (8), and person (9).

Under these definitions, an alternate payee might be a beneficiary, but is not a participant because she is an alternate payee.

By contrast, a participant is someone who is or may become eligible for a benefit because he or she is or was an employee or a member of an employee organization.

[Doghouse]

Another question: some of the partners are incorporated (PC's). Does that affect the ability to file an EZ rather than a full 5500? If you think it affects that ability negatively, can you point me toward something from the IRS so indicating? Thanks to all for prior and current thoughts!

[jpod]

It sounds like the incorporated "partners" (a misnomer, actually) participate by virtue of their status as employees of their respective corporations, not as partners of the partnership (because they are NOT partners of the partnership if their corporations are the partners). Therefore, isn't this a plan covering employees of two or more members of an affiliated service group? I have to think that disqualifies you from using the EZ, but I am not sure.

[mgcpension]

On 4/13/2016 at 5:37 AM, jpod said:

It sounds like the incorporated "partners" (a misnomer, actually) participate by virtue of their status as employees of their respective corporations, not as partners of the partnership (because they are NOT partners of the partnership if their corporations are the partners). Therefore, isn't this a plan covering employees of two or more members of an affiliated service group? I have to think that disqualifies you from using the EZ, but I am not sure.

I'm not sure either...does anyone know?

If the partners are s-corporation, does that make a difference?

[Mike Preston]

Yes, I know. Can't use EZ. Answer doesn't change if partners are S-corps.