An employer had a profit sharing plan at a bank that served as trustee and custodian. The plan's documents were also due to the employer's adoption of the bank's prototype plan.
The employer decided to switch institutions, and instructed the bank to make the transfer. On the transfer form signed by the employer and by the receiving institution, it indicated that it was a qualified plan (i.e., Keogh). Above the employer's signature it provides that the employer will amend the plan documents to name the new trustee "specified below" as the new custodian. However, the form did not have a spot for naming a new trustee.
The assets transferred. The receiving institution created IRAs and deposited the employees' respective benefits in them. The receiving institution claims that a SEP agreement was signed, but hasn't been able to find it and the employer does not recall doing so.
The employer claims it thought the profit sharing plan was being continued, just that the custodian (and perhaps trustee) was being changed. The employer had its accountant continue to prepare Forms 5500 for the profit sharing plan, which were signed and filed. Contributions were also made (being deposited into the accounts at the new institution) for a couple of years after the transfer and deducted by the employer.
Recently, concerns were raised. One is whether a profit sharing plan can be amended to be a SEP (assuming the new institution can find the SEP document it claims)? If not (or no SEP document can be found), is the bank yet the trustee? and has the bank breached its duties as trustee by not assuring that the accounts at the new institution be titled in the name of the bank as plan trustee? If a breach or error, how would that be fixed?
Also, if a profit sharing plan may not be amended to be a SEP or there is no SEP documents, do amendments the bank has since made to its prototype affect the specific employer's plan documents and keep them updated? If not, would that require a VCP filing for a document failure since some amendment deadlines have passed in the meantime?
Since the new institution became the successor custodian of ERISA plan assets (and was notified by the word "Keogh" on the transfer form that was signed on behalf of the new institution), does that institution have any exposure for having titled the accounts in a way that does not require the plan trustee's signature for distributions?
