what would you do, if plan never filed schedule P and.....

[Lori H]

1) non standard protoype doc was never updated for gust/egtrra/401(a)9

and

2) new client did not want to apply for VCP under EPCRS, but wanted to terminate plan

would you...

A) prepare final 5500 with schedule P. showing assets liquidated

or

B) run from this "dog".

Note: plan is profit sharing est jan 1995. two participants. less than 200k in assets. any "benefit" to filing schedule p, since if it does get audited, they would be in world of hurt regardless?

[WDIK]

C) Prepare a written statement detailing the situation the plan is in, possibile ramifications and the advisable course of action. Keep a copy. Then consider either option A (if I needed the fees) or B (if I did not).

[Lori H]

yeah, i have sent them a letter outlining the VCP process, fees involved and ramifications of non compliance. i think they are going to just keep there fingers crossed. it's more of a money issue with him i think. it will be more than that if the govt comes a knockin'

[E as in ERISA]

I would be careful about what one puts in a letter to clients in situations like this. I hope it would be limited to something like (a) a clarification of contractual obligations of the parties in re to responsibility for prep of the 5500, or (b) a general explanation of the requirements for filing or amending or whatever you're concerned about. As opposed to a detailed outline of all the client's wrongs and a warning stating that if the client doesn't remedy them, then certain penalties will apply. That could be a "smoking gun" that can be subpoenaed in court assuming that you are not an attorney and don't have attorney-client privilege. Not that a small case like this would go that far. But one ought to be careful about creating evidence that can be used against a client in order to protect oneself. A written list of the errors in a clients plan is generally not advisable if you haven't been hired to prepare that list and help correct the errors. It looks like LH's letter may have been general info.

[Lori H]

basically the letter states that the plan doc has not been updated, that it qualifies for VCP, attributable fees (both VCP and our 5500 admin), and advising them of potential liability if the plan got looked at. ultimately, this plan was neglected and did not have proper guidance by it's accountant. plan sponsor(guitar shop) was pretty much in the dark. all that's left in the plan is sponsor's money, the only other participant was paid out. hence, i doubt that participant would cause a stir i.e. lawsuit unless the plan was in fact audited and faced disqualification.

since plan sponsor does not really want to pay the couple of thousand it would cost to bring the plan into compliance through VCP and getting a new doc., there would really be no benefit in starting to submit schedule P's, since if it got audited, he would tagged irregardless. true? the statute of limitations really wouldn't apply or would be a mute point.