Partnership changing to a PSC

[Spencer]

I have a client who is changing from a Parntership to a Professional Service Corp. The owners will remain the same. Can I just amend their current 401k and 125 plan docs to show a change in the entity type? or should we terminate the current plans and start new ones?

also, besides the owners being able to participate in the 125 now, what are the advantages (as far as these benefits are concerned) in switching from a partnership to a PSC?

Thanks!!

[K2retire]

From the perspective of a TPA, the big advantage is that the owners will now have W-2 income instead of having to do the self employed calculation to figure out their compensation. From the owners' perspective, they have greater liability protection than under a partnership.

[Bird]

Yes, you just want to amend to change the sponsor.

[Spencer]

Thank you both!