Guest snmhanson Posted December 22, 2014 Share Posted December 22, 2014 Just curious how necessary a TPA is for a barebones Solo(K) Plan held in a brokerage account? Assume client uses a current prototype document to set the plan up and is smart enough not to overfund the plan, makes contirubions in a timely manner and restates the plan/makes ammendments as necessary. No other employees, no loans, no hardship distributions and plan assets would be rolled over to an IRA at retirement and before distributions are taken. I understand this message board is for benefit consultants whos job it is to administer plans, and it is seemingly not in your best interest to say that a TPA isn't necessary. In that regard, I'm not implying in any way that a TPA isn't worth the money they're paid. Just trying to determine the risks a clients is taking on in administering their own plan withing the above constraints. Thanks! Link to comment Share on other sites More sharing options...
Lou S. Posted December 22, 2014 Share Posted December 22, 2014 Depends how competent and diligent you are. If you are willing to educate yourself enough to know when amendments are needed, understand how law changes effect your plan, stay on top of tax filings and will never have employees other than yourself you can probably do it without a TPA. But I think you'll also hear some horror stories from folks on this board about folks who came to them after things blewup on them trying to do it themselves. As the saying goes, you generally get what you pay for. Link to comment Share on other sites More sharing options...
Popular Post John Feldt ERPA CPC QPA Posted December 23, 2014 Popular Post Share Posted December 23, 2014 Lou has it. Perhaps the first question is this: is a Solo-K actually the right plan for your needs? This answer you can likely get a straight answer at no cost from most TPA firms (after they review your complete situation). If a Solo-K is right, and you decide to take the "no thanks, -- I can do it myself" route, you will have some initial questions. The answers to these questions may raise more questions. Soon you may wonder if there are other questions that you also should be asking? So here are some of those questions, but it's merely a small, small sampling - this is not even the tip of the iceberg: When the IRS audits, will you have proper deferral elections on file that match up with the deferrals that were actually withheld? If you're a sole proprietor with no paychecks, how do you withhold deferrals and when do they get deposited? If you wrote a check to the plan instead of withholding from a paycheck, is that okay for a deferral, or is that only Roth, or neither? Will you be able to provide copies of each timely executed IRS-required interim amendment that the IRS auditor has on their checklist? Will you know which ones are not applicable to your plan (and why) so you can explain that to the auditor? When you say contributions will be made timely, what is the deadline for a deferral deposit vs. the deposit deadline for other contributions? What if your tax return filing deadline falls on a weekend or Federal Holiday - will that also extend your deadline to make the employer contributions? What constitutes a prohibited transaction? Do you have to file a different type of 5500 based on the assets you're invested in? Can the plan's investment in real estate have the property tax bill paid from your personal account? And can the renters of that property just write you a check and then you deposit the same amount into the plan later? If you need to fix some things on that property (the asset held by the plan), can you just do that work yourself and do you have to pay yourself any wages for that work? How does the W-2 get done then? What if you have "contract employees" (we hear that a lot) - are they employees or just contractors - does it matter who pays them, or who controls their work, or both? Does the plan need to have a fidelity bond, or is it exempt? Can your spouse also be covered by a Solo-K? What if it does cover your spouse and then you get divorced, does that change something about the plan? If so, when? What about the other businesses that you own, or other sole proprietorships you are involved in - does anything special need to be done to make sure that they are included (or not included) under the plan? If you're self-employed, how is the actual net earned income determined for getting to the deduction limit - how do deferrals and employer contributions affect that number - the same, or different? What about Roth - same or different? Can you do a Roth conversion in the plan, and if so how is that handled? What about this after-tax employee contribution thing - is that a deferral or an employer contribution (or neither)? When might that truly be something to consider for your plan? What if you make a mistake - are some mistakes fixable, not fixable, or are there specific ways these should be handled? What if you sell your company or buy another company - that won't affect the plan, will it? What are the proper steps to terminate the plan and what deadlines apply to the termination? If the plan assets upon termination are still under the 5500EZ filing threshold, does that mean no filing at all? How about the Form 1099R - what code(s) should apply and can it just be filed on regular paper from my printer? When the plan terminates, are there some special forms that need to be signed for the proper distribution to occur? All these and much, much more you can just ask here, or, perhaps you prefer to devote that time to your business to making a larger profit or to really anything other than this tedious stuff? Of course any answers you receive here have no reliance, some will be conflicting at times, and I'm pretty sure Dave Baker does not have an errors and omissions insurance policy that backs up the answers provided by this board, after all, it's just a message board. Well, an awesome one, for sure. Plus, if you do rely on just this message board or any other "free" advice, who will be watching out for you? For example, who will review your investment statements to ask what A, B, and C transactions really were, ask the right follow-up questions for you and then add notes and other information to your file for later when you get audited. Also, when a new law, new regulation, or perhaps some other obscure guidance is issued, who will be calling you or sending you an e-mail explaining the issue and perhaps even suggesting that you consider making a change to your plan to avoid the new X or Y tax, or so you can take advantage of rule Z? Shall we continue? Oh, look at the time. Let's just call it a night. Good night! (and Merry Christmas!) edit: there was a typo in there somewhere, and there's probably still some in there even after this edit. K2retire, Bill Presson, Mike Preston and 4 others 7 Link to comment Share on other sites More sharing options...
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