Name of Plan in which of two PAs

[thepensionmaven]

We currently administer a profit sharing plan sponsored by a dental professional association. No individual accounts. Two trustees, one retired and a replacement was named November 2021 and as of that date, ownership changed to new PA.

Under SECURE, we set up three separate plans, in name of the PA as it existed on 1/1/21 - one for each trustee, the third for the employees, effective 1/1/21 as the PA is on extension.  All contributions have been made to the existing plan in order to coincide with the existing PA.

The existing accounts will be transferred into their respective new plans with individual accounts in 2022.

One of the trustees is itchy that the new plans were set up under the old PA, we told him it had to be this way as the new PA did not exist on 1/1/21.

Since the money will not be transferred until 2022 and we are applying for a fidelity bond, and the bond will not cover prior acts, who is the sponsor and in whose name should the accounts be under?

As of now, the new plan is set up under the name of the old PA but probably will not be funded until individual accounts are set up with a carrier, prior to the due date of the PA tax return.

 

[Lou S.]

3 plans or 3 accounts?

It sounds like you were going from pooled to individually directed accounts and changing the Plan sponsor.

[thepensionmaven]

Three separate plans, one for each dentist so they can invest to their heart's content, one for the employees with individual account for each.

Original plan will be terminated, but we're not sure about naming of sponsor of employees plan as original sponsor existed on effective date of the new plan 1/1/21.

My gut feeling is that the sponsor of the plan for 2021 should be the old PA, change the name and EIN for 2022 as the new sponsor did not exist until 11/1/21 and the deduction is for the 2021 tax year.

[Nate S]

We've covered the issue before that the effective date of the Plan can pre-date the effective date of the sponsoring entity.

[thepensionmaven]

Sort of, but my question was two fold. I'm asking about the Sponsor, not the Plan(s).   The original plan will be terminated and three new plans established in 2021 for the 2021 contribution, will be made prior to tax filing deadline as mentioned.

As of this date, all monies are in the existing plan under the sponsorship of the "previous name" of the Plan Sponsor.

The question is, who is the sponsor of the 3 new plans?  Certificate of Incorporation dated 3/2022 refers to the name change of the sponsor, same EIN.  New Sponsor is a continuation of the previous sponsor.

We were thinking of keeping the name of the sponsor as it existed in 2021, to preserve an audit trail with IRS as the contributions have already been made under the name of the "previous employer," but no money transferred to the three new plans that have already been set up.but since they are really one in the same.

I'm extremely (overly) cautious with all the IRS audits, especially with my ERPA designation, and want to be consistent.  The "amended name" sponsor is currently applying for a fidelity bond and they are asking for the name of the Sponsor of the Plan.

 

 

[thepensionmaven]

OK, but not to beat a dead horse, shouldn't the new plans be dated in 2022, not 2021?  

Not sure.

TX.

[Nate S]

Why terminate the original Plan at all?  Establish two new Plans for each trustee and do two spinoffs. Then Sponsor of new Plans is new Sponsor, existing plan changes effective with the incorporation application.  Simple, clean, no hoops.

[thepensionmaven]

I agree with you, but accountant and attorney insist as one of the trustees may have acted imprudently.