control group question

[jsmith1985]

Hello,

I have a sole prop (no employees) and have a solo 401k with Fidelity.

This year I opened a C corp (100% owner, again no employees) and understand that I have a Control Group situation.

Discussed with Fidelity and they have provision to add Corp to my existing solo 401k plan as affiliated group of employers.

Anyone see any issue with this?

Thanks,

[CuseFan]

No issue, and that is most efficient manner to handle. There is no need to switch to a different plan and no sense in having a second plan unless of course you have significantly more income now and adding a defined benefit plan to increase deductions makes sense.

[jsmith1985]

My bad. Should have also mentioned that I have another solo 401k plan with Vanguard. This plan was created first and then due to investment restrictions had to open another plan at Fidelity.

So, now that I have 2 plans under sole prop, and adding new business to Fidelity, perhaps I need to look into terminating Vanguard's plan since Vanguard doesn't allow adding new business to existing plan (they want me to open another plan for new business). I guess the question is - do I need to add the new business to both plans or just adding to one be sufficient? If I need to add to both then I'm better off terminating Vanguard plan before adding new business to Fidelity plan and make things simple.

I've also been filing 5500-SF, 2 so far - 1 each for vanguard and fidelity.

I guess with Control Group I might need to file 5500.

Thanks,

[Bird]

Are you looking to add money to both plans?  If not, there is no reason to terminate or do anything special with the Vanguard plan (if not adding money to that plan).  If you do want to add money to both plans, well, you're letting the investment tail wag the plan dog.  I get that the "free" documents seem attractive and all that, but at some point, is it really worth all the hassle?  Vanguard and Fidelity (et al) are the ones giving you enough rope to hang yourself and should be answering your Qs.  Odds are very good that you are doing something wrong; exactly what I don't know but from experience and the nature of your Qs it seems likely.  Whether you get "caught" or not is another matter.  Good luck, like I said, I get it, but IMO these solo plans being "run" by individuals with no knowledge in the qualified plan arena are just an invitation for trouble.

[jsmith1985]

Bird - I'm not sure I agree with that.

Right now have 2 plans and file 5500-SF for both. That should be fine. No issues there except the fact that there are 2 plans. Contributions are made within limits ACROSS plans.

Now, looking to add new business, but before doing that, I close Vanguard plan, move assets to Fidelity. Now I have only one plan and add new business to it as Control Group.

Now if there is a way to keep both plans and add new business to Fidelity plan only then that makes it simpler.

Only issue I see is now I have to file 5500 instead of 5500-SF.

[Bird]

I would approach all of this from a different perspective.  Like I said, good luck...

[RatherBeGolfing]

4 hours ago, Bird said:

Vanguard and Fidelity (et al) are the ones giving you enough rope to hang yourself and should be answering your Qs.

That pretty much sums it up

[Lou S.]

Oh and now you have 2 documents to make sure you maintain. And if you want to make contributions to both plans from both companies, you'll want to make sure that both companies adopt both plans.

But as others have noted these are really questions for whomever is doing your plan administration be that Fidelity, Vanguard, or third party who is coordinating both.

The advice you get here on a free message board with limited information on your situation is generally worth what you pay for it.

 

 

[jsmith1985]

On ‎9‎/‎6‎/‎2017 at 1:53 PM, Lou S. said:

Oh and now you have 2 documents to make sure you maintain. And if you want to make contributions to both plans from both companies, you'll want to make sure that both companies adopt both plans.

But as others have noted these are really questions for whomever is doing your plan administration be that Fidelity, Vanguard, or third party who is coordinating both.

The advice you get here on a free message board with limited information on your situation is generally worth what you pay for it.

When you go with Fidelity/Vanguard, they maintain documents etc.

Of course, with multiple plans, one needs to be careful not to exceed contributions but other than that, I've not seen anything concrete so far.

Fidelity already mentioned that they have provision to add second company. Since Vanguard cannot, I have no problems terminating that plan, moving everything to Fidelity and then, only then, add second company to Fidelity plan. 

[RatherBeGolfing]

1 hour ago, jsmith1985 said:

When you go with Fidelity/Vanguard, they maintain documents etc.

Nope.  They provide you with the means to maintain your own document.  There is a big difference.  They do not make sure the document is properly filled out, or that you make timely amendments, or that you keep all necessary documents in a safe place, etc.  That is all on you.

Trust me, the people who frequent these boards have taken many Vanguard and Fidelity plans through correction programs for this very reason.

[jsmith1985]

25 minutes ago, RatherBeGolfing said:

Nope.  They provide you with the means to maintain your own document.  There is a big difference.  They do not make sure the document is properly filled out, or that you make timely amendments, or that you keep all necessary documents in a safe place, etc.  That is all on you.

Trust me, the people who frequent these boards have taken many Vanguard and Fidelity plans through correction programs for this very reason.

True, what I meant is they keep track of any documents that we need, send it to us, we sign and keep a copy, send them a copy etc.

what I meant is that they keep track of any new paperwork that needs to be complete. Completing them and filing them is of course on to us

[stephen]

4 hours ago, RatherBeGolfing said:

Nope.  They provide you with the means to maintain your own document.  There is a big difference.  They do not make sure the document is properly filled out, or that you make timely amendments, or that you keep all necessary documents in a safe place, etc.  That is all on you.

Trust me, the people who frequent these boards have taken many Vanguard and Fidelity plans through correction programs for this very reason.

Agreed.  Also note, they do not make sure you are using the correct definition of compensation for all aspects of your plan... that too is on you.

[TPAJake]

To be very clear, you do not really have 2 plans, you have 2 plan documents & that is not the same thing, so be sure they match down to the punctuation.  You are playing around in some very deep waters with nobody on the lifeguard stand.  There's a reason an entire compliance industry has been built around 401k.

If I were in your shoes, I would get serious about this thing & hire a local TPA to write you a real plan document that meets all of your needs & has no investment restrictions (we've seen everything from land to jewels to coins to fine art).  You can take that one document to schwab, fidelity, vanguard, or billy bob's house of bad investments & buy any investment product you like with it, then file a single 5500-SF for everything.  Your TPA will coordinate all of those moving parts & prep most of the forms for you.  And if I was really smart, I'd hire a local Certified Financial Planner to coordinate it all for me.