Form 5500 / First Day of Plan Year Entrants

Both Relius and FTW will rollforward a plan and enter the end of year participant counts as beginning of year counts.

Are people increasing that figure by the 1/1 entry dates?  NOTE:  I would OF COURSE take them into account for purposes of determining an audit requirement.

Based on the fact that FT/Relius pre-fill those figures, I have to make the assumption that they do not think this is a big deal.  Just curious if others think maybe it's not worth the time it takes to count them up each year.

If you use both the compliance and 5500 modules for FTW, it will also pull the 1/1 entry folks.  And yes, I would add them if FTW did not do so for me.

you are correct, FTW simply rolls last years data to the new year. How in the world would it know who entered at 1/1 (unless you are also using their admin software and somehow it tied into that, but I wouldn't know - or I suppose if it also had a Vulcan mind meld and 'knows' who enters 1/1)

Therefore, it only gives you a starting point that needs to be adjusted.

I would hardly say "they do not think its a big deal", but rather, knowing it is how the software works!

We use both Compliance and 5500 modules and it populates 5500 participant counts (beginning and ending) from the data in the compliance module.

58 minutes ago, Tom Poje said:

I would hardly say "they do not think its a big deal", but rather, knowing it is how the software works!

I don't disagree with any of you, but why would they would they roll it forward knowing that 90% of the time (perhaps more?) it is just flat out wrong?   It is not a starting point, it is wrong.

We use Relius for admin and FT for 5500's so it's not automated like that . I just wonder sometimes if it is worth all the extra effort we expend.  And for what?  So that the participant count will be 32 instead of 30?  Call me lazy, but I feel like I'm not exactly skipping a $100 ADP refund (something I would NEVER consider).

I would agree with austin3515.  Bothered me too.  If they know that they don't know, why roll anything forward.  Maybe better to leave blank.  Then it's up to the preparer to determine what to enter.

[since we don't use their compliance package, I wasn't aware that they could pull the actual BOY participant count]

Ahh, but do you update for first day of plan year entrants?

FTW has a report in the compliance module that breaks down the 5500 count.  So for an SF it will tell you BY count 10, 9 already active and one 1/1 entry, and so on for each count.  Its accurate about 99% of the time, but every now and then a rehire or something  like that will throw it off.  I had the same issue back when we used Relius. 

 I'm not sure why they roll, other than that it may be a legacy issue.  A long long time ago someone explained it to me as "IRS wants last years end count to match current years beginning count", and while that may have been true at some point, they sure want an accurate count now...

13 minutes ago, RatherBeGolfing said:

and while that may have been true at some point, they sure want an accurate count now

What makes you say so?  I haven't heard any talk at all?

We add the 1/1 entry people. 

On the other hand once you get past the audit requirement I have not seen anyone care.  As you say if it goes from 30 to 32 I have not seen an issue during an audit.  I am more likely to see 500 to 502 but same thing. 

The number I see IRS auditors zero in on is the number of terms not 100% vested and vested with balances.  They are looking for a partial termination and want to see the 8955-SSA match the other number.  I don't think you can make the link they do on that 2nd set of numbers but I have seen them make a huge issue of it. 

1 hour ago, ESOP Guy said:

The number I see IRS auditors zero in on is the number of terms not 100% vested and vested with balances.  They are looking for a partial termination and want to see the 8955-SSA match the other number.  I don't think you can make the link they do on that 2nd set of numbers but I have seen them make a huge issue of it. 

I just got this letter a month ago!  Fortunately I was able to respond and say "yup, it was a partial term."  In our case, we addressed the partial term and vested everyone on pay out, just forgot to say 0 on that line. What really happened is we paid them out during the plan year, forfeited their balance, and then discovered the PT and reinstated their forfeitures after the fact.  Thankfully it was an 8 person plan so not too big a deal.

4 hours ago, austin3515 said:

Ahh, but do you update for first day of plan year entrants?

Yes... for the past few years (maybe since electronic filing began with EFAST), we have tried to consistently update for first day of plan year entrants.  I can't recall where I heard this, but I thought I read or heard somewhere that EFAST will not flag an error if end of year count didn't match next beginning of year count, like they do for assets.

I recall, years ago, at the ASPA (yes, one "P") annual conference in the IRS Q&A session, comments I heard were that accountants like to see end of year "numbers" match next beginning of year "numbers"... but I can't recall what the IRS said in response.

Impressive - 2005 ASPPA Q&A:

44. For form 5500 purposes, must the participant count at the beginning of the year equal the ending participant count at the end of the prior year? In other words, does the planyear begin, THEN participants enter; OR, does the plan year and plan entry happen simultaneously?

A. New entrants on the first day of the plan year are counted in the opening participant count. Therefore, it is quite likely that the participant count at the beginning of the plan year will be different than the participant count at the end of the prior plan year.

Although I suppose the context of this conversation was based on that understanding.  But bravo!

• We use Relius and I am pretty sure the participant counts are all at zero when we roll the plan to the new year...But yes, I add new entrants to the participant count.

This discussion shows how a beginning-of-year count of participants, instead of merely repeating the preceding year’s end-of-year count, might add participants who had their entry date on the first day of the year.

Does the opposite change happen?  Could there be someone who was a participant on the last day of the preceding year, but is not a participant on the first day of the next year—because the plan paid (or otherwise distributed) the participant’s entire benefit on the last day of the preceding year?

I was going to say roughly the same thing, I would much rather it tell me what last year's number was (without me having to look it up on last year's form) and I increase it if necessary. If my count for the new year drops for some reason, I need to investigate why, it implies last year's count was wrong for some reason.

e.g maybe someone they reported last year as active was terminated and was zero vested so should not have been included.

12 minutes ago, Fiduciary Guidance Counsel said:

Does the opposite change happen?  Could there be someone who was a participant on the last day of the preceding year, but is not a participant on the first day of the next year—because the plan paid (or otherwise distributed) the participant’s entire benefit on the last day of the preceding year?

I don't think we would count a person paid on the last day as being a participant on the last day.  I see how you can make the case for it but I don't think we would do it.  So "no" I don't think I have ever seen a case where the beginning count is lower than the prior ending count outside of an error.

The harder situations are the plans that say everyone enters on 1/1 if they meet the entry requirement any time during the year.  I have a plan that if you meet the requirement on 12/31/2018 your date of entry into the plan is 1/1/2018. 

Once again you don't get too worked up about this if you are well above or below the line for a plan audit.  

You spend way more time on it if the person who met the entry requirement on 12/31/2018 is the person who puts you over the line and you now need to get an audit.  Does that person get counted as being a participant as of 1/1 or not for audit requirements?  What I have seen is that person doesn't count for this purposes but if you have a count over the limit on the 5500 and don't attach an auditor's report you will risk the letter asking why. 

ESOP Guy, thank you for the thoughtful information.

Someone could be transferred to an ineligible class of employees, and have no current balance under the plan.  Like if you start at Division B on 1/1, which isn't eligible for the plan.  And you have no past balance from when you worked at Division A.