401(k)/Profit Sharing & ERISA

[Paul]

Some help is greatly appreciated: I am considering an individual 401(k) plan that I believes has a profit sharing component to it. I am getting really frustrated and am wondering if I am getting my chain yanked.

Company 1 is saying they have a "QRP". They say is it not a Solo-K, but everything they talk about screams "401(k)". They tell me that a Solo-K does not fall under ERISA (which I agree with based on everything I have read), but their QRP does. They say it has judgement protection from creditors and falls under ERISA.  My questions:

1) How can any plan with only one participant (the owner...me) fall under ERISA and receive protection from creditors? I thought ERISA was intended to protect participants in employer plans?? If it does fall under ERISA, is it because the plan has profit sharing as well?

2) While clear with their marketing, what would/could make a "QRP" of Solo-K fall under ERISA and have asset protection?

3) An obvious question...my understanding that a plan that falls under ERISA would file an annual report to the DOL? Would I have an exemption to this requirement?

Any assistance is appreciated. To me it is the difference between spending $3,000 on this "QRP" vs a much lower fee for a Solo-K. Again, the promoters are saying it is NOT a 401(k)...but I am a big believer that is it looks, smells and acts like a 401(k)...it is a 401(k).

Thanks for any and all responses, in advance. 

[C. B. Zeller]

A QRP or qualified replacement plan is a way of avoiding or reducing the excise tax on reversions when a plan terminates with assets in excess of the maximum that can be paid out. Do you have an existing defined benefit plan that you are terminating? Without all of the relevant info, no one here is going to be able to give you meaningful advice.

All 401(k) plans are profit sharing plans ... but not all profit sharing plans are 401(k) plans. Section 401(k) is a "feature" of some profit sharing plans that allows elective deferral contributions.

There is no such thing as a "Solo-K" plan. There are profit sharing plans, with or without a 401(k) feature, that cover only the owner. These plans are exempt from Title I of ERISA, including the annual filing requirement with the DOL. There is an IRS filing requirement however.

[justanotheradmin]

I would just clarify - that "QRP" might stand for Qualified Retirement Plan, instead of Qualified Replacement Plan. So not necessarily anything to do with a DB plan that is closing. 

The promoter might be using QRP as a more general term to distinguish a more comprehensive plan from it's "solo 401(k)" product. 

I, like a number of folks on these boards dislike the terms "solo 401(k)" "uni-k" etc They are marketing terms that often confuse at best, or mis-lead at worst, and routinely create compliance issues. 

[Larry Starr]

I usually try to avoid responding to posts on this board that are NOT from industry people.  Clearly, you are NOT an industry person but an individual looking to set up a plan.

Recommendation: stay away from "Company 1".  They are either incompetent generally or just incompetent in communicating with you about how this all works.  In either case, write them off.

Find a competent retirement consulting/administration firm and BE WILLING to pay the price for proper assistance. 

And to repeat what others have said, there is NO SUCH THING as a "solo 401(k)".  It is simply a 401(k).  And whether it subject to Title I of ERISA (all plans are subject to ERISA, another incorrect statement in your posting; some are just not subject to ALL the sections of ERISA) or not, there is no difference in the plan documents. The facts of the situation determine if you are subject to Title I or not.

Best of luck.