5500SF Is this Term Participant counted in 12/31/2023 headcount

Safe Harbor 401k Plan with Cross Tested Profit Sharing

There are 2 Participants at 1/1/2023: 1 HCE and 1 NHCE

The NHCE terminates in 2023 with 1000+ hours credited (i.e. no "Break-in-service"), is 40% Vested, however, has $0.00 account balances (and therefore $0.00 vested account balances) in all sources (never contributed 401k therefore never received SHMatch, and no PS allocated in years participated).

Q: Is the NHCE counted on Form 5500SF as of 12/31/2023?

It is a Relius document and Forfeitures definition includes the "deemed" to have been paid... However, if a Profit Sharing or Forfeitures had been allocated in 2023, the NHCE would have shared in them.  Forfeiture definition goes on to say irrespective of the above, Forfeiture will not occur until the end of the first Plan Year for which the Participant is not eligible to share in the allocation of Forfeitures. Q: does this force counting the NHCE as of 12/31/2023?

Q: Is the NHCE counted simply because no Break-in-service as of 12/31/2023?

Thank you!

I am pretty sure this isn't the answer you want to hear but this is the answer that comes to mind around this time every year when a question like this comes up.

Will including this person put them to the point they need an audit? 

If so, think about it real hard.  I would think not but happy to be told I am wrong.

If not, stop overthinking it and flip a freaking coin, do what you want.... it is immaterial.  (Or if it is being audited already- which is most of the clients I work on do the coin flip or whatever you want) I can't tell you how much time in the decades I have been working in this industry I have seen wasted on questions like this when it doesn't make any difference.  I have never seen something like this ever come up in an audit (unless it was an audit plan or not).

If this doesn't put them over the audit count threshold I have spent more time writing this reply than I would have thought about this answer if I was faced with this fact set.   

Thank you so much for taking the time to reply.

if there were only 2 people in the plan at the beginning of the year, that's far away from the audit threshold of 100 participants for an audit to be required.

There are multiple counts done on a 5500-SF.  As of the beginning of the year there were 2 active participants and 1 of the participants had an account balance.  The NHCE terminated with $0 balance and a vesting percentage of 40% and is deemed to have had an immediate distribution of their vested balance.  The count for terminated employees during the year is 1, the count for participants at the end of the year is 1 (the HCE), the count for participants at the end of the year with an account balance is 1 (again, the HCE) and the count of participants who terminated with a partially vested benefit is 0 (the question asks if the NHCE is partially vested, yes, and is there a benefit, no, so no partially vested benefit).