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Single-Participant 401(k) Plan - 5500 Filing


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9 replies to this topic

#1 tgraham

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Posted 29 June 2004 - 09:27 AM

Is it correct that a Single-Participant 401(k) Plan does not have to file a Form 5500, until plan assets exceed $100,000? Also, is it ok for the investment advisor to use a "regular" 401k prototype plan document for a Single-Participant 401(k) Plan or does the plan document have to be specifically tailored for this type of plan? Thank you for your help.

#2 Archimage

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Posted 29 June 2004 - 09:38 AM

You are correct. There is no tailoring.

#3 PATA

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Posted 29 June 2004 - 09:43 AM

Yes, in the case of a single participant plan, if the assets are less than $100K (including receivables) there is no filing requirement.... No EZ needed.

A Solo K plan is in actuality a regular qualified plan and enjoys all the benefits under ERISA.... no difference in the kind of doc. I use my regular doc and simply tailer the choices to the client's desires (eligibility, vesting, etc.). Maybe some larger institutions spent the $ to create a specific document for the Solo client... Not necessary though.

I do stress to the client that once an employee is hired, that employee is eligible to be apart of the plan just like the sponsor. As long as the eligibility requirements are met by any employee, that qualifying employee must be allowed to enter the plan... cannot discriminate.
Its not easy being green

#4 wmyer

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Posted 29 June 2004 - 11:24 AM

There are some differences between a 1-participant plan and a multi-participant plan...e.g. blackout notice requirement, fidelity bonding requirement, bankruptcy protection, etc.

Also, you may need to file a 5500 or 5500-EZ even if the plan assets are less than $100,000 -- for example, if it is the final plan year, or if the employer is a member of a controlled group.

#5 Lame Duck

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Posted 29 June 2004 - 11:36 AM

You may also need to file if the assets are less than $100,000 for te one person 401(k) plan but you maintain another plan and the total assets of both plans are $100,000 or more. For example, where the sponsor has both a defined benefit plan and a one person 401(k) for deferral only purposes.

#6 Gregory

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Posted 29 June 2004 - 02:38 PM

Assuming you're exempt from filing (and the employer squeeks when they walk); a way to delay hitting the $100,000 threshold is to deposit only salary deferrals to the 401K and the employer discretionary to a SEP. Anybody see a rpoblem with this?

#7 Appleby

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Posted 29 June 2004 - 02:47 PM

Assuming you're exempt from filing (and the employer squeeks when they walk); a way to delay hitting the $100,000 threshold is to deposit only salary deferrals to the 401K and the employer discretionary to a SEP. Anybody see a rpoblem with this?

No. Providing the SEP is a prototype or individually designed SEP .
A 5305-SEP cannot be used in tandem with another plan

#8 PATA

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Posted 29 June 2004 - 03:22 PM

because you can't have a SEP (IRA SEP, 5305-SEP) along with a qualified plan and contribute to both... correct? But then what is a prototype SEP... a qualified plan?.. and dont your combine all assets of all qualified plans in determing wether you need to file? What am I missing ??

Edited by PATA, 29 June 2004 - 03:23 PM.

Its not easy being green

#9 Appleby

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Posted 29 June 2004 - 03:53 PM

Right- an employer cannot maintain (contribute to) a 5305-SEP while maintaining a qualified plan.
By definition, a prototype SEP is not a qualified plan --- as you know, qualified plans are defined under 401(a), while a SEP is defined under 408(k)

Generally, SEPs are exempted from filing 5500

#10 Gregory

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Posted 29 June 2004 - 04:05 PM

You cannot have a qualified plan paired with a SEP using a 5305-SEP.
You can have a qualified plan paired with a SEP if the SEP document is a prototype SEP. Contributions (within limitations) can be made to both under this scenario.
An approved IRA custodian/trustee may submit it's own SEP IRA document to the IRS for approval. It's still a SEP IRA - it does not become a qualified plan merely because it was individually approved by the IRS.
You do not aggregate the market value of the SEP IRA with the qualified plan for purposes of determining asset values for the 5500 reporting threshold.