Sole Owner W/ No EE's 401k Plan - No Document - No 5500 - Help

[Guest RS Vatalaro]

I have a new client w/ a PS only plan which will soon be converted to a 401k plan to take advantage of EGTRRA. In analyzing the situation and requesting takeover data, I came to the conclusion that this plan has no trust document and no 5500 has ever been filed (the assets are about 500K).

So it would seem we really don't have a qualified plan here. The CPA says that the broker was handling all qualified plan requirements. The broker said they never had any responsibility for it. The business owner has no clue about any of this.

Is there any remedy here to preserve the tax qualified (!) status of the plan? Any help is appreciated, thank you.

[Blinky the 3-eyed Fish]

See a prior discussion on this topic.

http://benefitslink.com/boards/index.php?showtopic=14791

[mbozek]

I dont know what you mean by no trust document. Most brokerages sponsor qualified prototype plans which include a trust. The employer adopts the plan by signing the document. Most prototype plans are adopted as standardized plans which means they are automatically qualified by the IRS. I think the question is whether the employer ever adopted a quaified plan. I dont know why the broker would be responsible for adopting the plan. The broker usually provides the plan documents to the employer for adoption. I think the problem is that the employer did not know that it was his responsibility to adopt the plan.

[Guest RS Vatalaro]

Thanks Blinky - that thread was exactly on point (I didn't come across it in my initial search).

Mbozek - by "no document" I mean the client (nor the investment provider nor the CPA, and there was no TPA) can't produce one and doesn't recall ever signing anything. This plan was begun in 1994. Yes, the investment provider has a std proto.

Thanks for everyone's help. My options are poor, as I suspected.

[rcline46]

By law, all investment houses, brokers, etc MUST keep the original application. Therefore the broker and/or the fund must have the application. They just might find that the application is part of an adoption agreement!

Threaten the broker with the NASD if he can't produce a copy of the application!

Then the mutual fund (or brokerage account) - they have SOMETHING on file to hold the account as tax sheltered. Get a copy of that!

How about the accountant - any records from that tax year? For taxes filed in 1995 we are just beyond the 6 year statute so they might still be available.

[mbozek]

rcline: You are assuming that the employer sent the application/ acct info back to the broker.

[rcline46]

Let's put it this way. In ANY account (tax sheltered or not) was opened by the broker / mutual fund without a properly executed document, then the broker/mutual fund has a MUCH bigger problem than your client. If you think the IRS or DOL is tough, you haven't seen what the NASD/SEC can do. Push the issue!

Now I agree completely the client is responsible for keeping the documents necessary to support his plan. But certain other documents which would indicate at least intent must be kept by the other parties, so get copies of them.

[Guest Fishchick]

Being knowledgeable about the "brokerage firm" (none in particular, of course. I know that generally records of applications are only kept going back about 7 years, and even then, sometimes they can't find them in the bazillions of documents on file. That doesn't mean that the firm never received it, but c'mon people. Why is it that noone ever asks for the application/adoption agreement until they are audited, and have never bothered to keep a copy for themselves?

[mbozek]

I guess the question is what evidence is there that an account was ever opened in the name of the plan at the brokerage. Every retirement plan account at a brokerage that I have reviewed has an account number and receives a monthly statement. I have been involved in several situations where because of mergers, frequent moves, etc, the brokerage co was unable to provide a copy of the application, adoption agreement or other documents which are required under compliance rules.