Participant count for large plan

I heard discussion that the IRS might change determination of plan size based on participants WITH balances rather than all participants.  So a 401(k) plan with over 120 participants with less than 100 deferring would still be small.

Did this change go through?  We have a 401(k) in the restaurant industry so there are nearly 200 participants, but only about 40 have balances.

3 hours ago, Cynchbeast said:

I heard discussion that the IRS might change determination of plan size based on participants WITH balances rather than all participants.  So a 401(k) plan with over 120 participants with less than 100 deferring would still be small.

Did this change go through?  We have a 401(k) in the restaurant industry so there are nearly 200 participants, but only about 40 have balances.

And where did you hear such a discussion?

Won't happen absent a statutory change.  Plus it would have to be the DOL, not the IRS. 

Apparently a DOL proposal for Form 5500 changes... which apparently has been halted (ASPPA article)...

*** Work on the Labor Department’s effort to expand, streamline and modernize the Form 5500 Series has been halted until a new head of the DOL’s Employee Benefits Security Administration (EBSA) is in place, according to ERISA attorney S. Derrin Watson. ***

https://www.asppa.org/News/Article/ArticleID/9203

But the good news (from the article)...

***** Watson noted a significant improvement in the way small DC plans are distinguished from large ones: Under the proposal, the definition would be based on the number of active participants with account balances. *****

There seemed to be a few other articles on this back in 2016-2017.

If I recall the proposal, the DOL was going to require all retirement plans, both small and large, to get an audit.  I would have to go back and read the proposed regs.

back in July 2016, part of the proposed form 5500 changes the following was included:

(and how I even tripped across some of this stuff is beyond me, because I know I didn't read the whole thing - 777 pages! but then most folks know I'm out of my mind anyway, attached if you are having problems sleeping - either at night or at work)

p.62 of the pdf

Defined contribution pension plans would determine whether they have to file as a large plan and whether they have to attach an IQPA report based on the number of participants with account balances as of the beginning of the plan year, as reported on the face of the Form 5500 or Form 5500-SF.

......

oh, by the way,  E-Fast 2 began 1/1/2010 and the contract runs for a decade, so changes are supposed to be in store for that as well.

p.2 of the pdf

These revisions, which are being proposed in conjunction with a recompete of the ERISA Filing and Acceptance System (EFAST2) contract, if adopted, generally would apply for plan years beginning on or after January 1, 2019. EFAST2 is expected to begin processing the Plan Year 2019 Form 5500 Annual Return/Report beginning January 1, 2020.

............

so I guess maybe with the plan year 2019 filings the changes will take place.

proposed_5500.pdf

The proposed changes were put on ice pretty quickly due to lack of funding, and 5500 modernization is not high on the DOL priority list at the moment.  From what I can recall from a Janice Wegesin session, it would likely take 2-3 years from when changes are approved so its not going to happen any time soon.  Some of the changes could happen outside of the 5500 overhaul, but I haven't heard of anything specific going on right now.

If anyone is interested, we discussed the proposed changes in this thread

20 hours ago, Cynchbeast said:

I heard discussion that the IRS might change determination of plan size based on participants WITH balances rather than all participants. 

I "THINK" you may be confusing the 403(b) participant counting methodology with the 401(k).  Just a thought.

Good Luck!