Participant Count Terminated Plan

[sam2012]

401(k) plan with 150 participants at the beginning of 2015 (80 were eligible but had no balances). In August of 2015 the plan adopted a resolution to terminate the plan but the company is staying in business. As of 12/31/15 there were still around 60 employees employed by the company (had not terminated employment) that still had balances due from the 401(k) plan.

My understanding is the employees with no balance are no longer participants since the plan terminated. The count would only be 60 and the plan would not need to be audited in 2016.

Per 5500 instructions, Active participants (i.e., any individuals who are currently in employment covered by the plan AND who are earning or retaining credited service under the plan). Since no balance are not earning or retaining credited service.

[My 2 cents]

5500 reporting is mandatory until no assets remain. That the plan is terminated does not negate the existence of people whose accounts are still held by the plan. Be prepared to file a 5500 for 2016. It is likely that the 2016 filing will not need an audit. You will want to make sure nothing hangs on past the end of 2016!

[Tom Poje]

my 2 cents -

that is not quite what is being asked I don't think.

I believe this is what is being asked.

I have a company with for example 120 active employees

plan is terminated so it is impossible to accrue further benefits.

for the 5500 do I put down

120 participants or 60 since only 60 have balances.

I'm not sure of what the answer should be

[Bird]

I vote for those with no account balances not counting at the end of 2016.

If you wanted to look for trouble you could say that they are still earning service (i.e. being credited with years of service). But if the plan term'd in August and they would have been entitled to distributions had they had any money, you'd have to be a real...whatever...to still consider them as participants. If someone had money and was paid out, I don't think anyone would count them, right? Which raises the question of a plan term in August - and no one (?) taking their money...? That sounds/smells a bit fishy.

[My 2 cents]

"That sounds/smells a bit fishy." Are we talking about some sort of synesthesia? What do fish sound like? And aquatic mammals don't count.

If the plan terminated before the end of 2015 and there were a number of otherwise eligible people who never contributed, I would expect that they would be treated, as of the end of 2015, as no longer participating. But I don't work on 401(k) plans, and I may have this wrong. Wouldn't they be treated just like people whose accounts had been paid out? There are provisions in most defined benefits deeming non-vested participants to have been cashed out immediately upon separation from service for their $0 vested benefits.

Doesn't the audit requirement apply based on participant counts as of the end of the prior plan year? I can see not needing an audit for 2016 but don't think that would be true for the 2015 5500 filing.