Larry Starr

Please clarify: are you talking about Roth deferrals as your after tax contributions? And if you are basing this question on the belief that a sole prop has until his tax return due date to make his regular 401(k) deferrals, you are incorrect. Clarify and then I can better deal with the question.

I have a slightly different take than RatherBeGolfing (anyone surprised?). FWIW, I was also involved in drafting the original Code of Conduct many years ago. Question: Do you have to provide the 2018 valuation? NO. It's that simple. You haven't been paid, so they don't own that work. Just FYI, in our shop we get paid FIRST before we do the val, so we just don't have that particular problem. Question: Do you have to provide another copy of the 2017 val? NO. You previously provided them what they paid for; they owe you for work you have done but they have not paid for. You owe them nothing until they pay what they owe you, at which point you can provide them copies of prior work and you can charge them for that (get paid in advance, obviously). Now, here's what I strongly disagree with. RBG said: "Basically, you don't have to hand over the 2018 valuation or your calculations/testing, but you do have to hand over the underlying data you collected from the client or third parties in order to do the 2018 valuation/testing like W-2s, K-1s, financials etc." I disagree with the highlighted part of that sentence. The data we collect from clients is filled out on our forms or is provided as COPIES of original source documents (like W-2s). It is OUR information; none of it is the client's. We don't accept original documents (if we get them, like a prior plan doc, we copy and return the original at that time). Copies of financial statements that come directly to us are OURS, not the client's. Copies they make and send to us are ours, not the client's. Basically, none of that data rises to the level of "... any and all records of the Principal that are necessary for the Principal to comply with federal tax Law". We are happy to provide copies of data, reports, etc from our files to a client who, for example, is leaving us. BUT, when they inform us they are leaving, we send them a letter (our "sign off" letter) and remind them that they have been given EVERYTHING that the new service provider needs to take over the client, but if they want things from our files, we have a fee that applies (and gets paid in advance), and we don't make it inconsequential (but it's also not outrageous - at least, I don't think so and I get to decide! ? ). Hope you find that helpful.

I sure hope to give you more that a "hello". Hope hugs aren't politically incorrect! See you there.

Is there a question there?

I have the same concern; why do you think you DON'T need the quarterly notices? I think you might have uncovered a bigger problem. Larry

Well, since there no longer are 412(i) plans, I have to assume you are NOT a pension professional (which defines most people on this board) but a potential plan sponsor who is not involved in the pension business. Now, of course, I don't know your particular situation, but I would question WHY anyone would want a 412(i) plan (it is now 412(e)(3) ). They are almost always a bad deal (except for the insurance company that sells them). I am the author of the Life Insurance Answer Book and have been intimately involved in fully insured DB plan issues for over 40 years. If you are still serious about this, just google "full insured defined benefit plan" and a whole host of insurance companies will come up in the listing.

Though I usually refrain from answering questions except those posed by professional plan administrators, I will give you a quick answer since, as always, Vanguard (or Fidelity, or Merril or UBS or any of those types of organizations) will ALWAYS give you the wrong answer. I am not a fan of DIY retirement planning; you get exactly what you pay for (which will be bad advice). You should hire a professional to guide you, but you won't, you just want free answers. Anyway, yes, you can do it. The problem is you can't use the standard SEP document to set it up since the IRS reads that "maintain no other plan" as meaning that there be no other plan in the same year. You would have to have a non standard SEP document that also deals with all the rules that are required to be followed when you have multiple plans in the same year, and organizations like Vanguard can't handle that (that is what us professionals are for). You probably shouldn't have terminated your prior plan, but without any expert advice, you did what you did and now have to live with it.

This is done all the time, particularly in professional practices, but not the way you say because that will cause problems. The way our clients do it is to negotiate an employment agreement that includes a compensation package and which makes clear that the compensation package INCLUDES any ancillary items, such as employer contributions to the retirement plan, group medical insurance premiums, car allowance/lease, (for docs at least) CME (which is continuing medical education), etc. So now, totally separate from the employment agreement, let's say we have a 401(k) plan that is set up to maximize the HCEs. The employer contribution is part of the compensation package, so the take home pay is a smaller amount than it would otherwise be. This is NOT a 401(k) deferral, and it is not the one time election mentioned in the other response. And if the new doc doesn't want any contribution because she wants to pay off some of her medical school loans, then fine, we amend the plan to either limit her to some low number that she would like, or limit her to zero (maybe, except for real 401(k) deferrals). This is an employer level plan decision, not a participant decision, so it's not a 401(k) deferral and not subject to the 402(g) limit. The employer is not required to do this and in fact, in some situations, the employee will still get, say, the gateway if we need that contribution made. We control these amounts by plan amendment, not participant election; we have some law firms where we do an annual amendment for the following year where every partner is limited to some fixed dollar amount of employer contribution (except for those who are maximizing).

The plan is adopted by an employer, and only the income from that employer can be counted. So, if the sole prop adopts a plan, any income received from another employer, whether W-2 or K-1, doesn't count for the sole prop plan (assuming no 414(m), (n), or (o) issues - controlled entities). It's highly unlikely that the 2% ownership will allow him to adopt a plan for that entity, so he has only his sole prop plan and only his sole prop income to take into consideration.

Ah, that explains everything. Justanotheradmin covered the issue; you didn't need to have a fourth plan and the best thing to do would have been to merge the three plans into one of the existing plans (but actually, there is an even better solution as noted below). It appears you still don't grasp the issue, so no sense beating a dead horse. Empower is worth every penny the client pays..... And, if you had a competent consulting firm involved, you would realize that you are better off with TWO plans (that can be identical) that splits the population of the employees so you are not going to need any audit, but now your $850 cheapie will cost the client maybe $10k for an audit. But at least it will be put off for a year. Great deal.

Easy one; you are right and Fidelity is wrong (sort of). If you present a well drafted QDRO that has that language, the plan HAS to accept it or give reasons for why it is deficient. Go ahead and submit your own QDRO (or use their sample but modify; you don't have to use their model you know). Fidelity is providing an automated method to produce a QDRO but it is not the only way to do it. Look at page 1, #2 on the attached form. You can plainly submit a manually drafted document if their "samples" don't work for you. Good luck; you will probably have to be persistent.

John, you don't have ANY loans from the plan, you had distributions made that were taxable and subject to penalties if appropriate. Calling an elephant a horse doesn't make it so. You have no loan procedures followed and no loan payments made. That ain't a loan; it's a withdrawal. Depending on how much money is still in the plan could impact my analysis of how to handle this. If the amount left is small and he is planning on taking it all out and paying tax on it (not trying to roll it over), I would suggest that: 1) He failed to report taxable distributions when he took the money out; 1099Rs need to be prepared for those years and submitted. He needs to talk to his accountant about filing amended returns (there are substantive questions as to statute of limitation issues, but IRS could claim longer than the normal 3 year period would apply). 2) Take the balance out and report it as taxable income. Don't try to roll it over because there are questions as to the qualification of the plan.

And one needs to point out to all the other lurkers on our board that the decision to NOT keep one of the 3 plans and merge the other two into it (and restate if you need to) seems to be the initial questionable decision and I can think of a whole lot of reasons why having a short plan year for a new plan was completely illogical. Maybe there are logical reasons to do what you did and if you wanted to explain why this was done we all gain some insight.

You are just so wrong; I'm glad I don't have to respond to the technical issues (see Bird's response). You got each and every point you made in that response wrong. I don't know who you are or what you do, but I do hope you are not working directly with clients without someone who knows what they are doing looking over your shoulder very closely.

While I agree with Bird's technical and practical answer generally, I would be more specific in this situation. The client hasn't responded at all to your requests for information; I would send a sign off letter saying: "Because she has not responded to our requests, we have no option but to sign her off and we have no more responsibility for her or the plan and she might have requirements that now won't be met. If she thinks this letter in error, contact us. Have a nice life!"

It's not a mistake of fact; it's just a plain mistake. The money doesn't belong to the plan, any more than if Vanguard deposited someone else's check into your client's account. They would fix it. That's what this client needs to do. That money doesn't belong to this plan; it doesn't matter if the other plan doesn't exist yet (that's a separate issue).

That's like saying you should have all your fingers surgically removed to avoid cutting them off with your chain saw!

I vote no.

Yup! Of course, as noted in a recent string of responses, we ALWAYS file a 5500 for every plan. Otherwise, you have not started the statute of limitations running on the plan, and that's a bigger potential problem than just filing a 5500. FWIW.

Participant's and alternate payees don't sign QDROs. What does the divorce document say is to be done? If I draft a QDRO that meets the provisions of the property settlement, it's now the lawyers problem. There are two parties involved. The lawyer for the participant is obligated to share the drafted order with the other side if the draft is not automatically included.

Only maybe. It could be a Sept 30 year end and the client doesn't get us the info until too late to do a full mini payout before 12 31. Or, the client hasn't decided on the PS contribution and they are within their extended filing time. But other than that Mrs Lincoln, it's a valid comment!

Agreed. And if there is some room because they are not at 415 limit, just have the second business also adopt the existing plan and you can use the comp from both if you need it to get to the 415 max. PS: There ain't no such thing as a "solo 401(k)". It's just a 401(k).

Doesn't work when there is an end of the year valuation and employer contributions allocated as of that date. Until that date, we don't know how much is allocated for the year. We will have a 12/31 balance for the individual.

Of course he can; we do it all the time. What do you think is the problem? The plan is still active; there are still employees of the employer (the two owners and their sons). However, your facts are confusing. If they made the SH contribution for 2019 for the terminated NHCEs, you already have that part as the deduction so there won't be a deduction for "only the 2 owners and their sons". If they contribute more, the deduction will still be appropriate (with all the normal conditions of meeting all the non-discrim rules). If the HCEs have additional compensation, then they will have additional SH contribution as well.

Trustee did what the participant directed. Whether participant checked the wrong box or not, that's the box he checked. He doesn't get a Mulligan in this game. Trustee clearly does NOT have the ability to reverse it.