Participant Counts for 2023 5500s--Eligible Employees WIthout Balances

[EPCRSGuru]

I think I know the answer to this but please can someone confirm?  I have a 403(b) plan funded exclusively by participant contributions.  Under universal availability, EVERYONE is eligible but, since there is no match and there is a separate employer-funded plan, we have a large number of eligible employees who elect not to contribute.  We report them as participants on the 5500 but without balances.   We are a large plan and there is no question that we need an annual audit.

New for the 2023 forms, the audit requirement depends on the number of participants with account balances.  "Both Form 5500 and Form 5500-SF, and their instructions, are revised to reflect a change in the methodology for counting the number of participants used to determine when a defined contribution pension plan may file as a small plan, including determining eligibility for the conditional waiver of the independent qualified public accountant (IQPA) audit requirement. Beginning with 2023 plan year filings, a defined contribution pension plan counts participants with account balances at the beginning of the plan year, except for new plans which use the number of participants with account balances at the end of the plan year."  

But the definition of Active Participant remains the same as previous years--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). This includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under the plan. This does not include (a) nonvested former employees who have incurred the break in service period specified in the plan or (b) former employees who have received a “cash-out” distribution or deemed distribution of their entire nonforfeitable accrued benefit.  So as long as someone is eligible to contribute we count them in this section, whether they contribute or not--right?  

Just checking to make sure I am not losing it--Secure 2.0 is testing my patience.

[C. B. Zeller]

There is no change to the question asking about the number of active participants. There is a new line item (6g(1) on the 5500, 5c(1) on the 5500-SF) which asks about the number of participants with account balances at the beginning of the year, and that new item is the one used to determine whether the plan is required to have an audit.

[pmacduff]

ok - so a plan filed their 2022 5500 return with an audit because they had over 120 eligible participants.  For 2023, they have 180 eligible as of 01/01/2023 but only 34 with balances as of 01/01/2023.  I know they don't need an audit for 2023.  Can they file a 5500-SF or must they file a 5500 with a Schedule I?  I've gotten differing opinions....

 

Thanks in advance!

[RatherBeGolfing]

1 hour ago, pmacduff said:

Can they file a 5500-SF

SF as long as they meet the normal requirements for a 5500-SF over a 5500 with Schedule I, such as eligible assets.

[pmacduff]

Yes - plan is with VOYA on VOYA's retirement plan platform.