One participant plan explained

[K-t-F]

From the form 5500 instructions the IRS writes this:

A “one-participant plan” is:

(1)     a pension benefit plan that covers only an individual or an individual and his or her spouse who wholly own a trade or business, whether incorporated or unincorporated;

(2)      or a pension benefit plan for a partnership that covers only the partners or the partners and the partners’ spouses. Thus, a “one-participant plan” can cover more than one participant.

 

On the other hand, merely covering only one participant does not make you eligible to file as a “one-participant plan” unless you are one of the types of plans described above. 

A CPA is saying that his client who has 1 employee who works 10 hours a week and does not meet the 1,000 hour requirement would still be eligible to file a form 5500EZ.  Based on the above that would not be the case.

Simple answer.. EZ eligible or not?

[Tom Poje]

(1)     a pension benefit plan that covers only an individual or an individual and his or her spouse who wholly own a trade or business, whether incorporated or unincorporated;

 

(2)      or a pension benefit plan for a partnership that covers only the partners or the partners and the partners’ spouses. Thus, a “one-participant plan” can cover more than one participant

 

 

If the plan (not the company) requires a 1000 to participate, and the person in question never had 1000 hours then he would not be 'covered' by the plan. so an EZ filing is ok

[RatherBeGolfing]

Tom is correct.  It's an EZ.

[CuseFan]

Ditto - but thought you were going in the other direction with your question, because we have a one person plan where the one person is the sole employee of the incorporated business but the business owner is not an employee. That plan is not an EZ filer and it is subject to PBGC coverage and premiums - an odd but interesting situation.

[K-t-F]

Thanks... that is how I understood the rule.  A owner could have one employee who works less than 1,000 hours.  If the plan requires 1,000 hours to be eligible then that employee is not eligible.... and the plan with only the owner as a participant would be EZ eligible. 

Sometimes I think too much

[Towanda]

Along these lines, I have a question about what is meant by the term "business partnership."  Does this include two people who share ownership in an S-Corp, or are we speaking purely of a partnership that files a 1065 and provides each partner with a K-1?

[spiritrider]

The term 'partner’ includes a 2-percent shareholder of an S corporation.