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SARSEP to 401K SH Foul up...Help!


Guest tomhard
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Guest tomhard

Thanks in advance for any help and info board members can provide.

A SARSEP from 1994 (95305A-SEP and I doubt ever updated) changed to a 401k SH this year September 1. Due dilligence was done (or at least attempted!) to make certain this could be done mid year.

Major wire house using Pennserve said no problem. TPA sited a Q+A from another service that was, in hindsight, ambiguous and TPA simply sent the Q+A to financial advisor who interpreted "no problem".

Major insurance company, the wirehouse FA and TPA took over the 401k;SARSEP money from emplyees was put in the new plan (all ee's chose to transfer and knew they had choices) in early September. All notices were given.

NOW, TPA informs this could not be done and says client needs to hire an ERISA attorney and offers no other advice. During discussion between FA and TPA, the TPA says "not our problem, it's all on the employer; we had nothing to do with the SARSEP." TPA unwilling to meet with client as " we would simply say hire a lawyer". TPA says their representative asked employer if money had been put in SARSEP during 2010--"did you fund the SARSEP" or words to that effect--note "you". Client said no, because he/corp had not funded the 3%. He was not asked about ee contributions, which had been made each pay period.

There is plenty of blame to go around here and I am not looking for a fall guy although I can't understand the TPA's attitude. I believe they think they are culpable and are stonewalling. I just need a way to help er solve this and if "hire a lawyer" is the answer have some leverage to share the cost among parties.

I've read every post on the SARSEP topic (77 pages!) and still don't see a course of action--everything has a caveat. Any suggestions or opinions greatly appreciated as to how to fix without damage to ee's or er.

Can 5305A be retroactivly changed to a prototype allowing this?

What happens if er calls IRS for help (as ins. co or TPA or wirehouse is helping the advisor help the client)?

Sure, he should hire a lawyer but he is left in the lurch by the parties that were hired to help and protect him.

What are the responsibilities of the TPA in assuring a proper plan change?

I am the wirehouse advisor trying to help my client.He is the most generous employer I've ever run accross (phantom stock, extra 5,000 pay each year ee has child in college, great medical and other)--he does not deserve this. Note that all monies hit the accounts in timely basis, he put the 3% into the 401k, everything above board--just given lousy advise.

Thanks for any ideas, comments opinions.

Best Regards,

T.

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I think the problem is that the document is the IRS Form 5305A, and (I think) the document doesn't allow another plan in the same year. I'd probably look into seeing if the document could be retroactively restated onto a prototype.

Ed Snyder

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Guest tomhard
Thanks in advance for any help and info board members can provide.

A SARSEP from 1994 (95305A-SEP and I doubt ever updated) changed to a 401k SH this year September 1. Due dilligence was done (or at least attempted!) to make certain this could be done mid year.

Major wire house using Pennserve said no problem. TPA sited a Q+A from another service that was, in hindsight, ambiguous and TPA simply sent the Q+A to financial advisor who interpreted "no problem".

Major insurance company, the wirehouse FA and TPA took over the 401k;SARSEP money from emplyees was put in the new plan (all ee's chose to transfer and knew they had choices) in early September. All notices were given.

NOW, TPA informs this could not be done and says client needs to hire an ERISA attorney and offers no other advice. During discussion between FA and TPA, the TPA says "not our problem, it's all on the employer; we had nothing to do with the SARSEP." TPA unwilling to meet with client as " we would simply say hire a lawyer". TPA says their representative asked employer if money had been put in SARSEP during 2010--"did you fund the SARSEP" or words to that effect--note "you". Client said no, because he/corp had not funded the 3%. He was not asked about ee contributions, which had been made each pay period.

There is plenty of blame to go around here and I am not looking for a fall guy although I can't understand the TPA's attitude. I believe they think they are culpable and are stonewalling. I just need a way to help er solve this and if "hire a lawyer" is the answer have some leverage to share the cost among parties.

I've read every post on the SARSEP topic (77 pages!) and still don't see a course of action--everything has a caveat. Any suggestions or opinions greatly appreciated as to how to fix without damage to ee's or er.

Can 5305A be retroactivly changed to a prototype allowing this?

What happens if er calls IRS for help (as ins. co or TPA or wirehouse is helping the advisor help the client)?

Sure, he should hire a lawyer but he is left in the lurch by the parties that were hired to help and protect him.

What are the responsibilities of the TPA in assuring a proper plan change?

I am the wirehouse advisor trying to help my client.He is the most generous employer I've ever run accross (phantom stock, extra 5,000 pay each year ee has child in college, great medical and other)--he does not deserve this. Note that all monies hit the accounts in timely basis, he put the 3% into the 401k, everything above board--just given lousy advise.

Thanks for any ideas, comments opinions.

Best Regards,

T.

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Guest tomhard

Thanks Bird and Jim.

Jim,

Yes, the TPA is now saying can't convert sarsep to 401k SH in same year because contributions were made to sarsep. I asked, then why did you let us proceed? TPA said client advised no contributions made in 2010 and that if no contribs it's ok and if any contribs can't do (but client thought TPA was asking if company had made contributions--3% match--and he had not; ee's making contributions each pay period).

Bird,

It is a 5305-A Sep document and I know the language is "don't use this form if currently have another plan"; when client used the form he didn't have another plan...but that seems not to be the meaning of that wording.

There seems to be no clear answer, but keep the comments coming!

Thanks!

T.

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ERISATOOLKIT is correct about that rule. The 401(k) Plan does not have a problem that I know of. The question is "Does the creation of the 401(k) Plan disqualify the SARSEP?" And that is a really good question. Does the Plan document say that you cannot have another Plan at the same time or does it say you cannot have another Plan the same year?

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Guest tomhard
ERISATOOLKIT is correct about that rule. The 401(k) Plan does not have a problem that I know of. The question is "Does the creation of the 401(k) Plan disqualify the SARSEP?" And that is a really good question. Does the Plan document say that you cannot have another Plan at the same time or does it say you cannot have another Plan the same year?

Do you mean the SARSEP document (5305A-SEP from 1994) or the 401k doc?

thanks!

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ERISATOOLKIT is correct about that rule. The 401(k) Plan does not have a problem that I know of. The question is "Does the creation of the 401(k) Plan disqualify the SARSEP?" And that is a really good question. Does the Plan document say that you cannot have another Plan at the same time or does it say you cannot have another Plan the same year?

That rule pertains only to the SIMPLE IRA, not the SARSEPs that predated the SIMPLE IRA. It's commonly called the 'exclusive plan' rule which states that you cannot make contributions to a SIMPLE IRA and other retirement plan during the same calendar year. Again, this rule does not apply to the SARSEP.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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  • david rigby changed the title to SARSEP to 401K SH Foul up...Help!

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