I didn't fund my Keough Money Purchase 2003-2006

[Guest Dboy]

I was negligent and failed to fund my Money Purchase for 2003-2006. I funded for 2007 and am about to fund it for 2008. I was then thinking of converting the Money Purchase and Profit Sharing accounts to a SEP-IRA to reduce reporting requirements, etc.

I talked to a Retirement Specialist at Fidelity that was very good. She pointed out that I had a "Funding Deficiency in my Money Purchase Plan" and that I should clear it up. She suggested that I could work this out with the IRS on my own using:

EPCRS-Employee Plan Compliance Resolution System (an IRS website)

EGTRAA-to ammend the Plan before terminating

ERISA-more advice, all complicated.

I've spent hours Googling all of that, but I think it's too complicated for me. I think I should have an easy case, since I'm the only employee, my mistake only affected me (negatively), and that I'm not being audited.

I think I should pay somebody who knows this stuff to fix it for me. I'd like to minimize penalties and get back on good footing with the IRS. Any advice?Is it possible that this won't cost me any penalties? Or should I just continue funding the MP and PS plans and not worry about it?

Thanks for any help, including names of people that are in the business of addressing this problem.

[Jim Chad]

Hi DBOY

In a way, you are right...it shouldn't be too difficult to fix. After all, it only affected you. On the other hand this is the IRS we are talking about dealing with here.

A couple of quick questions.

You said you are the only one in the Plan. Did you have any employees since 2003?

When was the last time the Plan was amended?

Will the limits on a SEP allow you to put in as much as you want to?

My email is jchad@lettinga.com

[Guest Dboy]

I've never had any employees and won't ever. I don't think I've ever amended the Plan, although maybe I did in the late 90's. So, I'm probably lacking some other paperwork requirements, also.

I'm 56 and semi-retired, so my schedule C income is only about $20k per year now. 2005 and 2006 were exceptions (more like $60K). So I'm really not sure which type of retirement plan is best for me. Someone suggested that I combine the two Keoughs into one SEP-IRA to simplify the paperwork, which I'm obviously not doing a good job with. I'm open to any suggestions.

I think I should treat this as two different tasks. 1. Bring my Keough Plan up to speed. 2. Decide what to do with it afterwards.

Thanks for all help.

[K2retire]

I think I should treat this as two different tasks. 1. Bring my Keough Plan up to speed. 2. Decide what to do with it afterwards.

Thanks for all help.

You're definitely on the right track with that thought.