jsmith1985

Sometimes the vendor knows the rules, but assumes that the potential client won't understand the nuances. In that case they are just over simplifying -- you can have employees, just not ELIGIBLE employees. Vanguard was emphatic - No employees allowed. Period. Since plan does not have any provision to have age/period of employment etc restrictions.

did talk to a couple of custodians and The view is that if one selects - Eligibility Service Requirement and selects 1 year, then employee has to work over 1000 hours to become eligible. It seems that this is the manner the plan documents are set up with IRS. So another custodian could have it set up the plan completely different. There are some other issues like break in service that one needs to be aware of. However, if plan allows, then selecting one year of service will most likely disallow anyone who works less than 1000 hours to participate in the plan. Another point was that one cannot distinguish between full-time and part-time employees. The only criteria is number of hours and length of "eligible" service. This is at least what I understood. Hope this information helps. Please do your due diligence before blindly accepting the above as accurate. Trust but verify should be the motto here considering the amount of conflicting information there is. If you find something incorrect then please let everyone know. We are all learning from each other and we are not experts in this field. Thanks to everyone who provided assistance.

Vanguard's Adoption Agreement form states in Section - two - Eligibility "There will be no age and service requirements under this Plan" Fidelity on the other hand does allow for age and service requirement but nowhere do they mention 1000 hours/year.

Got it. Thanks, In that case, even a Sole proprietor can have a part-time employee working less than 1000 hours a year that does not impact a Solo 401k plan. Then I do not understand why Vanguard/Fidelity mention that small business cannot have any employees.

Got it. Thanks,

But that is only for first year. What happens to second year when part-time employee is in Year 2?

Can a one person LLC create a solo 401k plan if the LLC has one part-time employee working less than 1000 hours/year and who is not the owner and not related to owner? If so, what is the process and what things one should look out for?

Can a one person LLC create a solo 401k plan if the LLC has one employee working less than 1000 hours/year and who is not the owner and not related to owner? If so, what is the process and what things one should look out for? Thanks,

Mike - since it your guess that the plans are not qualified because of their provisions, we cannot be sure of that. So, I think it is better to leave things as is. Would file 5500-EZ for T.Rowe plan that was closed and now I'll be with only one plan. Like Bird said, in our rule-driven (excessive rule), one is bound to be breaking some rule or the other. If your expertise is benefits plans then I'm sure you're breaking rules that govern some other facet of your life. So, one tends to do the best that one can do. I was a bit concerned about my colleague who has 2 plans and who is filing two 5500-SF forms and would advise him to consolidate the plans, perhaps transfer to one plan and that is it. If there are issues at that time then he'll have to deal then I guess. Finally, I'll still like you even if I disagree with you . One can disagree without being disagreeable.

Bird - I think the point being missed here is - It might not be preferable to have multiple plans (that I ended up) because of the hassle of filing multiple 5500 and multiple plan changes documents. I'm still trying to figure if having multiple plans is disallowed, If it is allowed to have multiple plans then no-one has mentioned anything, apart from the above, as a reason not to do it. I understand what you say regarding rules and laws and agree many people break something or other every day. Seen too many people rent rooms and never disclose the rental income. Happens all the time.

Mike - I just asked T.Rowe to transfer funds and close account. I'm assuming that this also closed the plan. Do not know if they asked me to submit any other paperwork apart from funds transfer papers.

Lou, As far as documentation is concerned, Fidelity, T.Rowe etc have sent Plan Documents and they are the ones who keep updating them. I just collect and keep them in a folder. And yes you are right, they send plan changes documents as well but it wasn't as difficult because they needed the same information. But yes, it is indeed a hassle to fill in multiple documents, no question about it. Perhaps the most effective way would have been to go through a TPA as you have also mentioned. However, it is what it is now, I can't go back in time and change it. I can only wish that Fidelity, T.Rowe etc. would provide us with accurate information since I was upfront with them about opening multiple accounts. Forcing all funds to keep within the group is really what prompted to look at opening multiple accounts. So, I guess in the end, the question remains - For T.Rowe account that was closed in 2012 and one which was funded, do I need to submit a 5500-EZ under penalty free filing for final year of plan. Should I submit another one for E-Trade account which was never funded? After this, I would have only ONE account and that is with Fidelity, So I'll be good and conform to standards. But I mentioned about my colleague (yes, we exchanged information on how to set things up) who has funds in both Fidelity and Vanguard (and his AmeriTrade situations is similar to E-Trade of mine) and he has submitted two 5500-SF online. I guess he will have to keep documents from both places and keep submitting 2 5500-SF for a long time. Hassle sure I get it but am not sure I'd classify it as "extraordinary and cumbersome" and I was trying to find out if there was something else that I was missing.

ok, then for sole proprietor/self-employed 1-participant plan, the following codes seem accurate. thanks everyone for their assistance. 2E, 2J, 3B, 3D

I have a colleague who is in a similar situation (we opened accounts together). Except in his case his accounts are in Fidelity,Vanguard and Ameri-Trade. He has submitted multiple 5500-SF returns one each for Fidelity and Vanguard yesterday. His situation with AmeriTrade is same as mine in E-Trade. Never funded and the company E-Trade closed the account, not him due to inactivity.

I've filed for Fidelity online yesterday. I've not done anything yet for T.Rowe and E-Trade. E-Trade - I never had any transaction T.Rowe - closed in 2012 after transferring to Fidelity. Hence, will be filing 5500-EZ for both under 'penalty-free' option that is valid till next year - I forget the exact date. And you are right. Fidelity and Vanguard knew that I had more than one 401k plan but neither of them said anything about this being a hassle. And I still, maybe due to lack of understanding, am not sure why having more than one plan is that cumbersome. All I see is that I have to file separate 5500-EZ with same information except the balances and contributions. What am I missing here?

Well, considering that people like myself have expertise other than setting up 401k plans, I was relying on information being provided by Fidelity and Vanguard. Why would I doubt the information that they provided? What is so extraordinary and complex about having more than 1 plan? What do you think are the implications considering that they are 1-participant, self-employed plan?

But the question that still remains is - For Sole Proprietors/Self Employed people who open and Individual 401k plan at multiple places - say Fidelity and Vanguard. I got their paperwork and submitted them. Could I have named plan in the two paperwork as same - 001? Are they not considered different plans? Or are they part of same plan with different custodians? If so then what do I tell Fidelity and Vanguard to change in their paperwork to signify that?

Vanguard documentation sugests using - 2E, 2J and 3D for individual 401k plans. why not 3B as well? Or is 3B only for Self-Employed i.e. Sole-Proprietor (which I am).

Submitted my 5500-EZ by filing 5500-SF online. See status - 'Filing_Received'. Does this mean all is ok and i don't need to do anything else or do I need to check back to make sure that filing was approved? Thanks,

You are absolutely correct. My bad. Should have counted on hand instead of in head.

thanks for the comment. does make sense.

But what does the EZ Form mean when it mentions 'available for public inspection'. This suggests EZ is not as private as some people believe.

that link is a bit different than the instructions on 5500-EZ. EZ says Oct 15 whereas the above link suggests that an extension no later than 9.5 months beyond plan close year will be given which means Sep 15. So with EZ we get an extra month.

well, right now is the time to fix all errors since there is a penalty-free period from IRS for all prior 5500. Isn't it?

How do you merge different plans into one? I just asked the custodians that I wanted to open a Solo 401k plans and they asked me to submit the paperwork. Had no idea that I was creating multiple plans, which was not my intention anyhow.