Inherited profit sharing plan

[Guest ingridak]

I have a client whose father had a Fidelity Keogh. The father died in 2002 after beginning his RMDs, and Fidelity moved the money into two accounts for the two kids/beneficiaries and titled the accounts inherited profit sharing plan in each of the childrens' names. Of course there is no document to go by and no 5500s have been filed, but in finding a place to start I wanted to understand if this type of a plan is even available, especially since there is no plan sponsor and the only activity has been RMDs.

[Bird]

First, recognize that Fidelity's goal is to plug things into their system so everything is automated. So, they created these "inherited profit sharing" accounts, presumably with each beneficiary's social security number assigned, so that when a payout occurs it flows through their system and generates a 1099-R with no further fuss. It's not a different "plan" it's just an account titling convention.

Does this still qualify as a "one-man" plan, where the deceased father is the participant? I think so. So they may or may not have had filing requirements, depending on the amount of assets in the plan. Was an EGTRRA document signed in 2009, or maybe 2008? If so, then they're probably OK on all counts, unless assets were over $250,000 and an EZ filing was required.

Of course, now that non-spouse rollovers are permitted, they should roll their respective accounts out to IRAs and be done with the hassle of maintaining a plan.

[Guest ingridak]

First, recognize that Fidelity's goal is to plug things into their system so everything is automated. So, they created these "inherited profit sharing" accounts, presumably with each beneficiary's social security number assigned, so that when a payout occurs it flows through their system and generates a 1099-R with no further fuss. It's not a different "plan" it's just an account titling convention.

Does this still qualify as a "one-man" plan, where the deceased father is the participant? I think so. So they may or may not have had filing requirements, depending on the amount of assets in the plan. Was an EGTRRA document signed in 2009, or maybe 2008? If so, then they're probably OK on all counts, unless assets were over $250,000 and an EZ filing was required.

Of course, now that non-spouse rollovers are permitted, they should roll their respective accounts out to IRAs and be done with the hassle of maintaining a plan.

The assets have exceeded $250,000 since inception and there have been no 5500 EZ filings. The financial advisor cannot locate the original plan document, and Fidelity does not have it. Somehow the financial advisor submitted both GUST and EGTRRA restatements to Fidelity April 22, 2010. Since Fidelity did not return them the advisor feels that the documents are current. I am not sure how the IRS will treat a late amendment of an unknown original document under VCP?

[Mike Preston]

I would go back to Fidelity and find out explicitly what kind of account the father had and what kind of accounts were set up for the kids. Is it remotely possible that the father's account really was an IRA rollover from his Keogh? Is it remotely possible that the children's accounts are inherited IRA's?

Until you rule out that possibility, definitively, I would drill until you reach China.

[Bird]

I agree, make absolutely certain that these aren't IRA accounts, although all indications are that they are indeed some sort of plan account.

The fact that Fidelity hasn't returned the docs doesn't mean anything in particular; they're probably just sitting in storage. To state the obvious, given the results that we are looking at, Fidelity is NOT providing any compliance assistance, so they're not going to do anything if they get their documents back late.

Decisions have to be made about the non-filings and late amendment.