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Dougsbpc

When To Resign

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I'm sure many have run into this in one way or another.

A few years ago a local financial planner contacted us about administering two small profit sharing plans. They wanted us to go through them (essentially work for them). We agreed and had them sign our services and fee agreement.

After receiving the plan information (documents, prior 5500's etc.) it became clear that both plans were a mess. We should have resigned right then and there but we did not. Since it was close to the filing deadline on both plans we spent about twenty hours cleaning up the plans and preparing 5500's.

The financial planner has refused to pay us and has generally not been cooperative in providing us information. The IRS now wants to audit one of the plans. We would like to resign as administrator on both plans as we have never been paid and dont think we should have to go through the audit for free.

Our services and fee agreement states that either party can resign with 30 days written notice.

Does anyone have a take on what our exposure would be by resigning?

Thanks much.

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You state that you "would like to resign as administrator on both plans " but from what you have posted I cannot see where you are the administrator of the plans. You might be a service provider of some sort but I wonder to whom? You do not mention having any agreement for services with either the Plan Sponsor, the Trustees or the employer, you only mention the financial planner. What makes him/her authorized to make you the administrator or anything?

I cannot remember ever seeing the Plan Administrator being selected and engaged by the sales rep or advisor.

As a side issue, were you receiving any protected private financial information? If yes, Who and What authorized it etc?

It seems that you might have been doing work that no responsible party authorized.

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Unlike all of our other clients, we do not have a direct relationship with the plan sponsor and trustee in the case of these two small profit sharing plans. The financial planner is the contract administrator in this case. The financial planner simply hired us to assist them in preparing reports and the 5500.

Our services and fee agreement are between the financial planner and us.

In the agreement, we indicate the responsibilities of the financial planner to us. One of those responsibilities is to provide timely, accurate data including all investment statements and valuations that reflect all assets and financial activity of the plan. They have not honored this nor have they paid us one dime.

Clearly one party might have recourse on another that is paid for services, but what about when no payment is made?

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We agreed and had them sign our services and fee agreement.

What does this contract/agreement say with respect to non-performance or non-payment?

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I would not have thought that such an arrangement would exist, mainly because of the potential for what has now happened. But, I guess the real problem is what can be done now.

Are administrators required to be licensed by the State or otherwise? If so, maybe a threat to report would help.

Is this information regarded as being protected by any privacy laws? A similar threat could be made.

Since the IRS wants to audit, maybe the plan might make you whole then engage your services for the audit? Have you had any contact with the plan?

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