No val, no schedule sb

[Gary]

A company sponsors a one participant/owner pension plan.

The sponsor wants to contribute $0 for 2009.

If a valuation were performed a $0 minimum funding requirement is certain to be achieved.

However, plan sponsor does not want to pay for val or schedule sb.

The plan has less than 250k so no 5500EZ required.

A valuation and schedule sb is required to be furnished to sponsor, but of course sponsor does not want to spend money for it.

What are the consequences? It's not a funding deficiency excise tax because if a funding were computed it would be $0.

Is this grounds for IRS plan disqualification? What else?

Thanks.

[Guest greybeard]

I would tell the sponsor to find another actuary.

Sooner or later he will want to terminate the plan and then he may have to pay for 10 or more years of valuations and Schedules SB. Maybe the plan will be overfunded or deficient. How will one know without the backup.

[SoCalActuary]

A valuation and schedule sb is required to be furnished to sponsor, but of course sponsor does not want to spend money for it.

Thanks.

The magic words in this post are "not ... spend money". Threaten to resign. Let the loser face the consequences. Then don't waste any more time on them.

[Gary]

I agree with the comments in the post, but I still haven't gotten a response to the "consequences" to plan sponsor for not having a val and schedule sb.

Assuming no funding deficiency my guess is an IRS audit would result in either taxes and penalties or plan disqualification all together, but that is my guess.

Thanks.

[SoCalActuary]

I agree with the comments in the post, but I still haven't gotten a response to the "consequences" to plan sponsor for not having a val and schedule sb.

Assuming no funding deficiency my guess is an IRS audit would result in either taxes and penalties or plan disqualification all together, but that is my guess.

Thanks.

Start with "failure to perform their fiduciary duty", "failure to maintain plan records", "failure to determine tax status of funding standard account", "failure to prepare and pay excise tax on 5330". If any of these concepts seem appropriate, feel free to use them.

If you come up with something that works as a good scare letter, I would like to see a copy. Thanks.

[david rigby]

Whether or not you are successful convincing the sponsor that some action is needed, the previous advice to resign as EA is the best approach. As SoCal correctly points out, this sponsor will probably object to any of your services that cost him/her money, anytime in the future, no matter how competitive your pricing may be.

Alternatively, get paid first.

[SoCalActuary]

You might forward this additional info from the IRS website.

http://www.irs.gov/retirement/article/0,,id=112858,00.html#19

Some people listen better when they see the IRS logo on correspondence. :angry:

[ak2ary]

The fact is that you could wind up with more ethical problems keeping him as a client than the val could possibly be worth to you. And his downside is almost nonexistent unless he gets audited and thats not likely for a plan with less than 250k

Of course if it ever gets above 250, he will have to pay someone to do all the work...

There may be excise taxes if he failed to meet min funding but, as you say, right now the min is obviously zero