Zoey

Thanks Rather! I agree... I think that is probably my only option (unless I sell to the firm that I consult for, which was kind of the reason I was asking about the multiplier). Unfortunately I know another local TPA firm that I wouldn't approach to buy my business because of their shady practices and incompetency's, but if they caught wind, I also wouldn't put it past them to spread the word that I was selling.

Thanks, Rather... Yes, I have thought about that too. But as soon as someone asked me to sign an agreement, even before I signed, I would have a pretty good idea on what they are up to. And if I were to ask them to sign the agreement and they were to say, "I'm not interested", they would already know that I am looking to sell and they would have no responsibility to keep it confidential. I still may just be paranoid, but I've put a lot of blood sweat and tears building this business to risk it dwindling it down to nothing before selling.

Thanks Retired! I agree... that's the key... finding someone who specializes in TPA transactions. (It's kind of a niche business.) This company has offered 1.5x annual. I am also thinking about a cash balance plan for the proceeds, so I don't get hit with higher taxes. I was wondering if a cash balance plan is a possibility to delay taxes and then in say 5 years roll it to an IRA and take as needed? (I know enough about cash balance plans to be dangerous... lol. (DC plans are my world).) Funny thing is, one of my clients business is helping companies sell their businesses. I thought about asking them, but how do you do that without letting on that you are thinking about it and risk losing them as a client? How do you talk to other TPA firms without worrying that they will "spread the word", and risk losing clients? Maybe I'm just being paranoid.

Being a one-person TPA firm, I don't get vacations or any time off where I can completely unplug. I have been doing DC plans for 30 years and have been on my own for over 22 years and haven't had a true vacation since going out on my own. Now that I am approaching retirement age (5 years to go), I would like to be able to take some much needed time off (after tax season, of course). So I am looking to sell my business in 2025. (My book is very clean.) A few years ago, I also starting doing consulting for another TPA firm... helping them with their 401k plans. (Glutton for punishment, I know!) I told that TPA firm that I am looking to sell my book of business and they are very interested in buying it and want me to come work for them (remotely) for as long as I would like, or I am willing to. I have researched and researched selling a service business and the multipliers are all over the place... from 1x annual to 5x annual. They use the same software that I do, so the switch should be pretty seamless as far as that goes. And having no employees, there are no salaries for them to acquire... other than mine... and very little (if any) added expense, I would think. Has anyone recently purchased a one-person TPA firm such as mine? Or sold one? I was wondering what price to expect the offer to reasonably be and any details (such as how long did the seller work for the buyer after the sale, what period of time (if any) did the buyer spread the payment over, any customer retention provision, etc.). Of course I would have an attorney review the contract, but any assistance or insight you can give me would be greatly appreciated. Thanks!

Paul, that IS very well written. This was the first company purchased for this owner (so no controlled group yet), but he is looking to buy more soon. Very good point on the SIMPLE or SEP, and the auto-enroll! Thanks! And thanks for giving me more to think about... GAH!

CB, thank you for the cite. That's very helpful. I agree, and I had already mentioned the 100 participant rule. The problem with putting it back on the CPA is that they are telling the client that it is up to the TPA to determine, and we have told the client it's up to the CPA to determine. I too, do not want to make that determination... lol.

Thanks Bill. That was my initial thought as well. The CPA was asking, and at first I said that since it was an existing plan, I didn't think it wouldn't qualify. But then I started second guessing myself, since it's a new EIN applied to the plan. So I was hoping someone has run into this and could confirm (or rebut) our thinking. What if they buy a new company, start up a plan for that company, mirroring the current plan (same provisions, same investment company, same investment options, etc.)? And they do that for each and every company? Then I would think, yes for those companies... but at what cost? Would the credit be enough to offset the start up costs, separate valuations, combined testing, multiple 5500's, etc.? (I haven't done the math. To use Bill's term, I'm just spitballing here... lol.) And to take it even further... What if they set up new plans for all the new companies going forward, and then after the tax credit phases out, merge the plans into one plan as long as you don't have anti-cutback issues? (I just know this will be their next question.) TIA!

I apologize in advance for my ignorance, but I haven't had this question come up before. A company acquired an existing 401k plan (stock purchase). Can the new company get the tax credit (as if it were a new plan, new company)? There is a new EIN, new trustees, etc., but the same, existing plan. Also, this company plans to purchase other companies soon, but they plan to have them terminate their existing plans (if applicable), as part of the purchase agreement. They would then add them (as controlled groups) to the current plan. (Same 1 owner (and spouse) on all companies.) In those instances, can they get the tax deduction for each and every new company as they are established?

Maybe this is a simple question, but I'm having trouble wrapping my head around it and I've never had it asked before. I have a potentially new client who wants a 401(k) plan. They have union employees covered by a collective bargaining agreement. So the premise would be to exclude union employees from the plan, right? Except they also pay these union employees non-union income to cover their travel expenses. AND, one of the two owners works for the union as well. Part of me says, well that part of the income isn't covered under the collective bargaining agreement (or able to be deferred, matched, etc), so that income would automatically be included, and they would be eligible for the non-union plan for the income not covered in the agreement. But the (prototype) language that any employee covered by a collective bargaining agreement is excluded has me wondering. Your thoughts? (Thanks so much in advance!)

Wow...I am so very sorry I did not respond to these posts. I did not receive notification that I had more responses. I just came out here to search for something else and seen I had responses. Thank you all so much for your input. And I appreciate your explanation and links ESOP Guy. BG, a few thousand... 4-5K each year. And I have no idea if the gov't cross checks. That was my question too... how it wasn't caught.

Thanks Luke and BG5150. Both valid points.

Good point Bill, that most do not calculate the RMD either, unless it's an IRA. Thanks! Roll Tide!

Thanks CuseFan. I have seen some brokerage firms (depending on how they set up the account(s)), prepare 1099's. I had some plans with brokerage accounts in the past, where they did prepare the 1099's. I have another brokerage firm that I currently have mutual clients with, that also prepares them, but only on some of their accounts. I only found this out after I too, had prepared the 1099-R for the plan...ugh. But you are right, most do not. So, when I am working with brokerage accounts, I confirm with the financial advisor if I will be preparing the 1099's for the plan or not. Your advice is basically what I told the financial advisor. Have the son talk to his Dad's accountant to find out for sure if he did or did not claim it as income each year. And if he didn't, then they need to contact a tax attorney. Thanks!

Thanks so much Belgarath! I knew it wasn't subject to the 20% mandatory withholding, due to not being eligible for rollover, but I would have thought the 10% would have been taken, although as you stated, he "could" have elected out of it. Although I'm not sure he elected anything. It sounds like everything was done automatically without any completed forms. I doubt the institution stated anything in writing as to who was responsible for filing the 1099's. The financial advisor tells me that they get a different answer every time they call, depending on who they talk to, and wouldn't swear to it, that during one of those calls they may have been told that the institution would be preparing them. I agree, his biggest issue is going to be the tax consequences on his tax filings. But I didn't know if they would need to generate 1099-R's for the missed 1099-R's or needed to report something to the IRS from a plan compliance standpoint. They were asking for my help in making this compliant, after the fact. Again, thank you!

I received a call from a financial advisor who has a solo-k client. The client has taken his RMD's faithfully for 10 years. The TPA who had the plan was told that the financial institution calculates the RMD and distributes it automatically. They were also told that the financial institution would prepare the 1099-R each year. Fast forward to 10 years later. The plan terminates and the client rolls his assets to an IRA (with the same financial advisor and same financial institution). When the TPA inquired as to the amount of the rollover and confirmation again, that the financial institution would be preparing the 1099-R, they informed them that they found out that there was never a 1099-R issued by the financial institution...ever. I asked if the financial institution withheld federal withholding, and if so, the IRS should have caught it (as they would have received 945 withholding and have nothing to tie it to), but that hopefully it's not as big of an issue as it could be then. They stated that they confirmed that the financial institution never withheld federal withholding. YIKES! So I asked if the client reported the income on his taxes. They stated that they don't believe he did. DOUBLE YIKES! So they asked what would be involved in correcting this. However, the owner is now incapacitated and his son has power of attorney. To be honest, I have no idea how to fix this and how far back we have to go. I have never had this issue. Has anyone had this problem or know what needs to be done, or can direct me to a cite. Thank you so much.