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What if Plan uses Employer's EIN for 1099's and/or Accounts?


BG5150

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We have some plans done by a former administrator that have individual brokerage type accounts.  I believe these accounts were set up using the ER's EIN instead of a Trust EIN.

What are the ramifications of this, if any?

I always get a separate TIN when the accounts are either in a pooled account or individual brokerage accounts.  The former admin ceased doing that because he got tired of the pushback when the TIN was retired due to inactivity.

I was setting up a new plan, and was told it was OK to just have the sponsor's EIN as the Trust EIN in the doc.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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15 hours ago, BG5150 said:

What are the ramifications of this, if any?

No practical ramifications.  If 1099-DIVs are suppressed on the accounts, as they should be, then the IRS isn't getting anything to find anything wrong with in a cross-checking process (and I believe if it is a corporation they're not cross-checking anyway).

Having said that, we do exactly what you do.  (I guess) the former TPA was waiting until there was a distribution to get an id number?  Or in fact using the 'er id for distributions...that opens a different can of worms.  I see not getting a trust id number right away as just delaying the inevitable deactivation, but it's not really a crazy approach.

Ed Snyder

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IRS has been squishy on this over the years.  I remember a story from a TPA who had a client in arrears on payroll withholding deposits.  IRS finally hoovered up their bank accounts - including the plan assets - since they executed the levy based on the EIN.

So a separate number is best practice, but there are thousands of plans using the EIN on accounts.

I carry stuff uphill for others who get all the glory.

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14 hours ago, shERPA said:

IRS has been squishy on this over the years.  I remember a story from a TPA who had a client in arrears on payroll withholding deposits.  IRS finally hoovered up their bank accounts - including the plan assets - since they executed the levy based on the EIN.

So a separate number is best practice, but there are thousands of plans using the EIN on accounts.

Exactly.  It is permissable to use the employer ID but then you do get mixed up with payroll WH and it is not a good idea (and the worst-case scenario of the IRS seizing plan assets although I have to believe they were returned...but who wants to be involved in trying to fix that?!).

Ed Snyder

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Another consideration, if the client is in a state that requires withholding, using the EIN of the employer it can cause tremendous issues. We had a CA client that was audited by the state and it a mess trying to unwind the Plan's withholdings from the Employers obligations. The state was completely unreasonable through this process and fines/penalties were stacking up quarterly. It was a mess. It is easy enough to get a TIN for the Plan so we do for every plan that is not on a recordkeeping platform.

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