Amended plan too soon

[JARichardson]

We have a client who was a sole prop that told us late last year they were forming a C corp and the plan needed to  be amended effective 1/1/2020 to make the C corp the plan sponsor.  The plan was amended and the amendment was signed.  Now the CPA is asking if the fact that they are still paying payroll, etc. through the sole prop is a problem.  We didn't make the sole prop a participating ER because we were told it was going away effective 1/1/2020 and now they are stating it will be 1/1/2021.   I can't find anything that supports revoking the amendment.  Is VCP the only option for correcting this?

[Bird]

It's not clear if the corp exists yet.  If not, I have no problem simply losing the amendment.  Think what you want about me.  If the corporation exists and will be needed as the plan sponsor eventually, I would currently date but retroactively amend the plan to add the sole prop as an adopting employer.  I'm not 100% sure that is a valid fix but it does not concern me (if it did concern me I don't think I could handle more than about 5 plans).

[Lou S.]

Sole Prop sponsored prior to 2020.

Corp adopted for 2020 but Sole Prop didn't sign on as adopting employer.

I'm with Bird, have Sole-prop adopt now retro to 1/1/2020 as adopting employer. Tell them to get back to you when they want to remove the sole-prop from the Plan.

[JARichardson]

Makes sense to me!  Thank you.