ETA Consulting LLC Posted October 29, 2016 Share Posted October 29, 2016 This concept of value is based on a false premise; as previously emphasized. It's like virus protection software on a computer. It doesn't do anything or protect you from anything; UNTIL you are targeted by a virus. Until then, it just sits there. However, the costs of such virus protection would seem relatively small when compared to the potential financial damage that could be caused by not having one. So, it's a moot point. Arguably, you can sponsor a plan and operate it yourself while knowing nothing. When you encounter a problem, you can come to a board like this one and get all your questions answered. At the end of the day, you may come out good. Then again, you may find that you spend 15 hours researching an issue that a skill professional could've addressed in 15 seconds. So, you do calculate your value on the 15 minutes of work the skilled professional had to perform or a 15 hours of work (under stressful conditions of not knowing what you're doing) you saved yourself from having to do.I know this all too well. Even when I tried to paint my house. I often come to the conclusion to hire someone to do work that I have no patience or time for while I continue to do things that yield greater value to me.What I would NEVER do is make a suggestion that a skilled professionals 15 seconds is not worth much, because that would clearly undermine the years of intense study that equipped that professional to address a situation in a relatively short period of time. Good Luck! CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
matth100 Posted October 29, 2016 Author Share Posted October 29, 2016 What I would NEVER do is make a suggestion that a skilled professionals 15 seconds is not worth much, because that would clearly undermine the years of intense study that equipped that professional to address a situation in a relatively short period of time. Just to be very clear - I've never thought or said that the TPA isn't worth much, I think very highly of the profession and the qualifications. But to use your painting analogy, I wouldn't hire Michelangelo to paint my tree house. Would he (if he were still around) do a great job? Undoubtedly, but the value of the house just wouldn't justify the expense of hiring him. Saying I wouldn't want to hire him isn't a judgement on his skill, competence or years of training. I'm just trying to find a way to get people who might not be able to afford (in a practical sense) a TPA to have access to a Solo K. Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted October 29, 2016 Share Posted October 29, 2016 I'm just trying to find a way to get people who might not be able to afford (in a practical sense) a TPA to have access to a Solo K. Matt, the point you are missing (or perhaps simply overlooking) is that a client who cant afford a few hundred a year on competent and qualified advice should probably look for savings vehicle more in line with what they can afford. And honestly, if you are putting away $18k+ a year, it is not that you cant afford it, you are simply too cheap for your own good. This isn't Michelangelo vs a handyman for a tree house, this is hiring a librarian to your electric work. Sure she may have read up on how to draw wires and how to ground, but there is a good chance she will burn your house down. On a side note, I'm not sure what ethical standards you are held to, but most professionals in this forum are held to circular 230 or higher, and providing services for something you are not qualified for would be a big no no. Something to consider. Â Â Link to comment Share on other sites More sharing options...
matth100 Posted October 29, 2016 Author Share Posted October 29, 2016 I'm just trying to find a way to get people who might not be able to afford (in a practical sense) a TPA to have access to a Solo K. Matt, the point you are missing (or perhaps simply overlooking) is that a client who cant afford a few hundred a year on competent and qualified advice should probably look for savings vehicle more in line with what they can afford. And honestly, if you are putting away $18k+ a year, it is not that you cant afford it, you are simply too cheap for your own good. This isn't Michelangelo vs a handyman for a tree house, this is hiring a librarian to your electric work. Sure she may have read up on how to draw wires and how to ground, but there is a good chance she will burn your house down. On a side note, I'm not sure what ethical standards you are held to, but most professionals in this forum are held to circular 230 or higher, and providing services for something you are not qualified for would be a big no no. Something to consider. Well, I see it a little differently regarding cost. For example, the Mutual Fund industry could say the same: "If you can't afford 1.5% fee then you shouldn't be invested in the market" but in reality there is an ETF out there for 0.04% that does a better job for a lower price. Note that I'm not suggesting that I could do a better job at all than a TPA, just using a correlation between the concepts of pricing, and active vs passive management. Regarding the ethical standards, that is a good point. And circling back to my original line of questioning, in addition to what sort of recordkeeping requirements are needed for a SoloK, to address your question directly: What qualifications are required to send through a prototype SoloK and ensure that the client doesn't go over their limits/do anything out of bounds? Is a certification such as the QKA, QPA, CPC, ERSA, etc a qualification, and is it required by law to do what I'm talking about here? Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted October 30, 2016 Share Posted October 30, 2016 Matt, I see your point fees, but I disagree. You will always have to pay something to get competent advice. There is no such thing as set it and forget it for compliance. As to ethical or professional standards, there is no requirement that you have a designation or certification. Most professional rules of conduct require that the practitioner is competent in the area. The problem with your situation is that you can't simply learn a limited amount in order to just deal with "solo 401k's", because it is a marketing term. In order to be competent to work with one participant plans, you also need to understand single employer qualified plans. Who is going to create the plan document? Are you competent to answer the questions in an adoption agreement? Do you have a good grasp on compensation, contributions, deductions, etc.? Are your clients going to get W-2 comp or are do you need to do an earned income calculation? If you are actually looking to learn, I would suggest ASPPAs QPA designation. If you work through those exams you should have at least the basic understand of how plans work and what can create problems. Â Â Link to comment Share on other sites More sharing options...
matth100 Posted October 30, 2016 Author Share Posted October 30, 2016 Who is going to create the plan document? Are you competent to answer the questions in an adoption agreement? Do you have a good grasp on compensation, contributions, deductions, etc.? Are your clients going to get W-2 comp or are do you need to do an earned income calculation? I have a good grasp of compensation and will be setting up their payroll and deductions. Clients will be on W2 comp. Plan document is off the shelf 'Prototype' I wouldn't seek to build anything custom. I'm looking seriously at the QPA cert, I spoke with the ASPPA last week and they advised me to wait until Jan when the RPF 1 and 2 switch to a modular format. Thanks again for the help. Link to comment Share on other sites More sharing options...
ETA Consulting LLC Posted October 31, 2016 Share Posted October 31, 2016 But to use your painting analogy,might not be able to afford (in a practical sense) a TPA to have access to a Solo K. My painting was not an analogy, it was a real situation for me. My virus protection comment was an analogy used to illustrate the point. The reason I even bothered to comment on this post is because over the past 10 years I've been aggressively correcting financial advisors who were quick to suggest that there was no need for a TPA simply because it was a one-person plan. This was a mindset that carried over from the old Keogh days. Back then, you mainly had a single source of funding in the plan. Nowadays, you have several sources of funds; each with their own rules. Books can be written on the potential failures. I think the most appropriate analogy would be purchasing a Mercedes Benz and not being able to afford the insurance premium. The easy argument is that if you cannot afford the insurance premium, then that would question whether or not you can really afford the Mercedes. I understand that each case is difference, but the idea of cutting corners and trying to make it seem 'practical' has been proven disastrous on many occasions. I've even explained to advisors why $12,500 in a SIMPLE IRA is better than $18,000 in a solo(k) plan. The main reason is that in a SIMPLE IRA, you don't need a TPA. In a solo(k) plan, the $300 fee that you quote is really for the additional $5,500 in contributions you are getting; and that amount is even reduced by the 3% employer contributions on top of the deferrals. Good Luck! CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
matth100 Posted November 1, 2016 Author Share Posted November 1, 2016 But to use your painting analogy,might not be able to afford (in a practical sense) a TPA to have access to a Solo K. My painting was not an analogy, it was a real situation for me. My virus protection comment was an analogy used to illustrate the point. The reason I even bothered to comment on this post is because over the past 10 years I've been aggressively correcting financial advisors who were quick to suggest that there was no need for a TPA simply because it was a one-person plan. This was a mindset that carried over from the old Keogh days. Back then, you mainly had a single source of funding in the plan. Nowadays, you have several sources of funds; each with their own rules. Books can be written on the potential failures. I think the most appropriate analogy would be purchasing a Mercedes Benz and not being able to afford the insurance premium. The easy argument is that if you cannot afford the insurance premium, then that would question whether or not you can really afford the Mercedes. I understand that each case is difference, but the idea of cutting corners and trying to make it seem 'practical' has been proven disastrous on many occasions. I've even explained to advisors why $12,500 in a SIMPLE IRA is better than $18,000 in a solo(k) plan. The main reason is that in a SIMPLE IRA, you don't need a TPA. In a solo(k) plan, the $300 fee that you quote is really for the additional $5,500 in contributions you are getting; and that amount is even reduced by the 3% employer contributions on top of the deferrals. Good Luck! Thanks for the advice. Link to comment Share on other sites More sharing options...
BG5150 Posted November 1, 2016 Share Posted November 1, 2016 Going back a few comments about the owner dying in a "solo" K:If the only participant dies, the plan will have to terminate, thus making the participant 100% vested. Or, the participant will forfeit some of his account. The forfeiture account can be reallocated. he forfeits some more. it gets reallocated again. And again and again, ad infinitum (or ad nasuem) until there is only a penny left and he gets the remainder anyway. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
austin3515 Posted November 1, 2016 Share Posted November 1, 2016 Well I thought of that too. The only participant terminates, so it's a partial termination. But if I was the IRS and someone skips 3 years of RMD's related to a plan design that really never ever ever has a risk of forfeiture, I might call your bluff on that. I should point out too that were only talking about employer contributions made to this plan. We're not talking about skipping RMD's on accumulated rollover balances. So neat idea, but probably only avoiding a few thousand a year of RMD's. I don't think its worth it. Maybe if they were socking away 200K in a DB plan though? Still it seems risky since no one was ever really going to forfeit. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted November 3, 2016 Share Posted November 3, 2016 If the account is not vested, I think the nonvested portion of the RMD is added to the next years' RMD. I did not look this up, but that is my recollection. So if the DB plan has a 3-year cliff schedule, uses the later of age 65 or 3rd anniversary of entry for NRD, and excludes years prior to the plan establishment for vesting purposes, then any RMDs for the over age 70.5 owner which are not vested are thus not paid but they are carried forward to increase the next years' RMD. Correct me if I'm wrong, but that's my memory on this. As to the solo-k topic here. If you're a TPA that tracks time spent by client, you might be surprised by how much hand-holding these owner-only plans actually need - especially in the first several years, and very much especially if they are also doing their own investing (no advisor - they're paying the TPA, so how can they afford an advisor too, right?), and even more so when it's time to end the plan. They can really eat up a lot of your time. Remember, they usually don't have staff to help them, so once they find you are reliable and straight forward about how to handle their plan, they call and ask you for all kinds of help, such as "How should I be filling out this investment form for the plan?", "Who do I write the check to?" "How does the distribution withholding work and how do I get that paid to the IRS?". And when a contribution deadline is approaching you might have to remind and explain multiple times and in various forms why you need the data request completed and returned. Perhaps it would be better for someone else to take a crack at these plans. Maybe I am wrong about this, but I am not convinced these plans truly help the bottom line of a TPA, other than it can build relationships that turn into additional future business. IMHO, FWIW. RatherBeGolfing and 401king 2 Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted November 3, 2016 Share Posted November 3, 2016 Maybe I am wrong about this, but I am not convinced these plans truly help the bottom line of a TPA, other than it can build relationships that turn into additional future business. IMHO, FWIW. I agree with you 100%. I only do them as a courtesy to other service providers I do business with. They do not actually generate revenue, and the client needs a lot more hand holding. Â Â Link to comment Share on other sites More sharing options...
matth100 Posted November 3, 2016 Author Share Posted November 3, 2016 Maybe I am wrong about this, but I am not convinced these plans truly help the bottom line of a TPA, other than it can build relationships that turn into additional future business. IMHO, FWIW. I agree with you 100%. I only do them as a courtesy to other service providers I do business with. They do not actually generate revenue, and the client needs a lot more hand holding. Me too! Link to comment Share on other sites More sharing options...
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