jsmith1985

Would strongly suggest that you contact a HR professional who'd be able to assist you in classifying personnel correctly. Wrongly classifying personnel can jeopardize many things including payroll/benefits, 401k plans etc.

True, what I meant is they keep track of any documents that we need, send it to us, we sign and keep a copy, send them a copy etc. what I meant is that they keep track of any new paperwork that needs to be complete. Completing them and filing them is of course on to us

I was hoping that people on this forum who do this, would already have an idea of costs. Since they create plans that their clients take to Vanguard/Fidelity. My suggestion to OP is: - Don't let the fear of filing multiple 5500-SF scare you - As TPAJake mentioned, do NOT exceed contribution limits. As long as you follow that, submit all paperwork in time, you should be good as long as your situation does not change. If businesses become too complex, then of course it might be worthwhile to take another look. Of course, if you are not comfortable - filing paperwork or - calculating contribtions (these are 2 things that trip most people) you can take professional advice anytime to ensure that everything is kosher.

When you go with Fidelity/Vanguard, they maintain documents etc. Of course, with multiple plans, one needs to be careful not to exceed contributions but other than that, I've not seen anything concrete so far. Fidelity already mentioned that they have provision to add second company. Since Vanguard cannot, I have no problems terminating that plan, moving everything to Fidelity and then, only then, add second company to Fidelity plan.

I'd need to find out costs associated with having accounts with Vanguard and/or Fidelity using a custom-built plan. What the annual charges/asset based charges etc. are before making a decision to go with a custom-plan. Once I have that information then perhaps like you mentioned elsewhere, I might go with a retirement specialist.

Bird - I'm not sure I agree with that. Right now have 2 plans and file 5500-SF for both. That should be fine. No issues there except the fact that there are 2 plans. Contributions are made within limits ACROSS plans. Now, looking to add new business, but before doing that, I close Vanguard plan, move assets to Fidelity. Now I have only one plan and add new business to it as Control Group. Now if there is a way to keep both plans and add new business to Fidelity plan only then that makes it simpler. Only issue I see is now I have to file 5500 instead of 5500-SF.

My bad. Should have also mentioned that I have another solo 401k plan with Vanguard. This plan was created first and then due to investment restrictions had to open another plan at Fidelity. So, now that I have 2 plans under sole prop, and adding new business to Fidelity, perhaps I need to look into terminating Vanguard's plan since Vanguard doesn't allow adding new business to existing plan (they want me to open another plan for new business). I guess the question is - do I need to add the new business to both plans or just adding to one be sufficient? If I need to add to both then I'm better off terminating Vanguard plan before adding new business to Fidelity plan and make things simple. I've also been filing 5500-SF, 2 so far - 1 each for vanguard and fidelity. I guess with Control Group I might need to file 5500. Thanks,

I have already done. I started with having one at Vanguard. But Vanguard didn't allow stock investments in this account. Hence opened another plan with Fidelity that did. This was done many years back. Been filing 2 5500-SF for some time. If you'd like to continue as sole prop w/no employees, then perhaps it doesn't matter whether you have one plan or two. Yes, you'll need to file 2 forms instead of 1 but they are not that difficult to do once you start doing it. But also keep in mind what some people who are more experienced than me in these things are suggesting on these forums, in case your situation changes. @RatherBeGolfing - Thanks for mentioning 408b-2. I might need to look into that as well and see what they say about termination fees.

Hello, I have a sole prop (no employees) and have a solo 401k with Fidelity. This year I opened a C corp (100% owner, again no employees) and understand that I have a Control Group situation. Discussed with Fidelity and they have provision to add Corp to my existing solo 401k plan as affiliated group of employers. Anyone see any issue with this? Thanks,

I'd like to thank everyone for their comments/suggestions. It has really been a very helpful discussion with differing perspectives. Please keep them coming.

Hello, Thank you for your response. I thought it was well established that the solo 401k was better than SEP Solo 401k - one needs to have an W2 wage of 144K to get to the max contribution of 54K SEP - one needs to have 216K in W2 wage to get to 54K since all 25% comes from employer, unless one has a SARSEP plan which is old version of the plan. Please let me know if I'm missing something here. For your next set of questions: As I mentioned, started C corp recently since some clients wanted it. Had a sole-prop before and hence was familiar with Solo-401k plans. Since I own 100% of the C-corp, would need to add this corp to my solo-401k plan as a control group. Employees - Am not right now planning on having any. Reason I asked is to find what to do that is cost effective. As a small business, I can afford to put 25% profit share on a solo plan but that high percentage becomes difficult when one hires employees. How many people want to take a reduced salary to get a high percentage of profit-share even though it is more tax beneficial?

So, a regular 401k can be set up with a 25% wage compensation as profit share and then when one gets employees then change the plan to safe harbor and have the Profit Share at 4% or whatever the options are at the time? Hiring employees might be something in future but not in the near future - say at least not until 2019. Thanks for your comments.

Just to clarify, I'm not questioning you at all. I'm sure you have your reasons why stated that. What I was wondering is - As long as one - sticks with reputable companies like Vanguard/Fidelity etc, - fill up and send back the amendments as and when they are sent, - keep all documents at one place shouldn't that be fine or is there something that these companies miss and people have to file VCP. Thanks

Absolutely correct. But I think other factors do come into play like if employee works over 1000 hours then you have to provide the plan to that employee, it seems that this cannot be bypassed in Fidelity eligibility conditions etc. unless I'm mistaken here.

Hello, Thank you for your comments. Looking for solo 401k right now because of the ease and the total amount that I can set aside. Hence, my thought was to keep solo 401k as long as I don't have employees that will require me to have a different 401k plan. I can definitely look at setting up a plan with assistance from a professional. The question that I have is - Can a 401k plan be set up that allows me to contribute as much as I can with a Solo 401k plan even when I have employees? Even if so, what highly-compensated calculations etc. come into the picture?

"On another note, the fact that you're asking these questions should scare you out of the solo(k) plan." Hello, Thanks for your reply. Am not sure why I should be 'scared' of these plans. They seem pretty simple to me and Fidelity/Vanguard have done all the legwork to set these up. Apart from the above questions (that too because of C corp) and Form 5500 if assets exceed 250K, what other concerns can one have for these plans?

Hello, Started a C corp recently and am looking to set up a Solo 401k plan as I have no employees so far. Have the following questions: (1) For employer profit share, do I need to have profits or can I make contribution, which is 25% of W2 wage, from reserves/capital etc.? I know the term is profit share but then it is 25% of employee compensation and not a % of profits. Hence the question. (2) How soon after I pay myself do I have to transfer funds to Fidelity, both profit and employee contribution? (3) What happens when I hire employees? I understand that I'll need to close this solo 401k account? what is the process? If i hire employees in the middle of the year, can I still make employee and employer contribution for part of the year? Thanks for your assistance.

Goal is Retained Earnings for the first several years as well as reduce personal income during this period. Dividend could be zero during that time and thus double-taxation can be avoided. C-Corp seems to be the only entity that allows for Retained Earnings. What does your accountant say? Trying to get more information myself first so that when I go to my accountant, I'm prepared with some details.

Goal is Retained Earnings for the first several years as well as reduce personal income during this period. Dividend could be zero during that time and thus double-taxation can be avoided. C-Corp seems to be the only entity that allows for Retained Earnings.

Thanks but that is the standard explanation. LLC taxed as a Corporation becomes a hybrid entity. So, ONE member LLC taxed as C-Corp, would need to pay wages to member, pay payroll taxes, etc. (Does it need to pay Unemployment taxes that C-Corps pay or would the fact that it is still a LLC makes it avoid it?)? So question becomes how is the rest of cash (after paying wages, contributing to 401k as Employer contribution) distributed? Dividend or Distribution? What if i'd like to retain some earnings in LLC for operations? Too many questions :-)

Hello, Need to know how to handle income/taxes of a Single-member LLC taxed as a Corporation. Requirement is to have some Retained Earnings in LLC as well as contribute as much as possible to a 401k plan. Do I need to take wages out of LLC in order to contribute upto 25% of compensation for Employer Profit Share? Are both wages and distributions included in compensation or just wages? What if LLC had some retained earnings i.e. LLC earns 100K, I take out 60K as wages, LLC contributes 15K as 401k profit share, I take 10K as distribution and leave 15K in LLC for operation needs. Since I've set LLC to be taxed as Corporation, how does the above scenario work? Thanks,

Hello, Am in the process of filing this form based on information from Fidelity forms. Fidelity provides 5 pieces of information: (1) Jan 1, 2014 balance - Goes on Line 7(a) column (a) (2) Dec 31, 2014 balance - Goes on Line 7(a) column (b) (3) Investment Earnings - Where do I enter this? Line 8(b)? Which column (a) or (b)? (4) Fees Deducted - Again where do I enter this? (5) Cash Contributions - seems that this will go on line 8(a)(1) and 8(a)(2) but WHICH column (a) OR (b) should I enter this. Thank you for your assistance.

Not to drag this on endlessly, but that calls for another warning - unless you are very careful, if you set up your own plan and then want to put the investments with Vanguard, they are likely to set up a whole new "plan" instead of just opening an account to hold the money in the plan. You have to pretty much assume that they will try to screw things up and be on your guard the whole time. If one sets up one's own plan then I hope they use someone in this field to do that to ensure the above issue is mitigated. But good point, since it seems that Vanguard/Fidelity have cookie-cutter solutions which cannot be customized.

The link: http://www.irs.gov/Retirement-Plans/One-Participant-401%28k%29-Plans From the above link, "Testing in a one-participant 401(k) plan A business owner with no common-law employees doesn't need to perform nondiscrimination testing for the plan, since there are no employees who could have received disparate benefits. The no-testing advantage vanishes if the employer hires employees. No matter what the 401(k) plan is called by a plan provider, it must meet the rules of the Internal Revenue Code. If you hire employees and they meet the plan eligibility requirements, you must include them in the plan and their elective deferrals will be subject to nondiscrimination testing (unless the 401(k) plan is a safe harbor plan or other plan exempt from testing). " do not know if this is what allows one -participant plans to have non-eligible common-law employees.

Thanks, That does mean that using Vanguard's plan to open an Individual 401k (the easiest way possible to do this) is out of bound as Vanguard will not allow employees. So only option, if one really has to use Vanguard, is to create one's own plan. But then using Vanguard as custodian etc leads to more complexities. Better to find a custodian - like Fidelity - that already has the plan set up to allow for exemptions for employees that do not meet the 1000 hour in a year criteria.