Referral to third party administrator for Individual 401K

[MFouz]

Can someone refer me to a reasonably priced TPA to do annual administration (including 5500 form) for a Solo 401K plan? I'm getting quoted prices that are for traditional 401k plans and that makes no sense. Thank you.

[chc93]

Maybe... as others have continued to say... a "Solo 401k plan"  IS a "traditional 401k plan".  It's just that this "Solo 401k plan" has only one participant.  

[MFouz]

Chc93 my first time here ;-). So, are you saying in terms of the work, it's pretty comparable? So, that's why the fees are similar?

[Gadgetfreak]

If it is truly a SoloK (one that only covers the owners/spouses) and the Plan has less than $250k in assets, then no annual work is needed. HOWEVER, what most of the "1-800" shops don't tell you is that you will need an annual 5500 when assets exceed $250k AND testing/calculations are required if there are other employees. Furthermore, I have found that they never tell their Solo clients about mandatory document restatements.

Use (and pay for) a TPA that will offer those services or take on the responsibility on your own (and don't mess it up :)). TPAs offer value.

[Bird]

On 1/9/2022 at 9:25 AM, Gadgetfreak said:

the Plan has less than $250k in assets, then no annual work is needed.

It may not be "needed" but it is recommended and might eventually come back to bite you if not done.  e.g. husband and wife plan; just throw money in a pot...years later, who is entitled to what?  Ditto for different sources - it might make a difference how much is employee 401(k) vs. employer later on (of course definitely if there is Roth money commingled).

That said, I do not believe the work and fees are comparable to a plan with employees.

[JOH]

Check out Ted Kao at Pension Benefits Consultants 510.836.5300. Very reasonable.

[Barbara]

Most firms give a small discount for H&W plans, because no testing is required.  Where are you located?

[Mike Preston]

4 hours ago, Barbara said:

Most firms give a small discount for H&W plans, because no testing is required.  Where are you located?

Not relevant, don't you think?

[BG5150]

On 1/9/2022 at 9:25 AM, Gadgetfreak said:

Plan has less than $250k in assets, then no annual work is needed.

Not true.

In addition to what Bird said, I cannot tell you how many times these sole proprietors, on the advice of accountants or financial advisers, just chunk the entire 415 limit in every year.  Then it turns out, they do not have the income to support the contributions.  Or, if they are over 50, the contribute the 415 maximum plus a catch-up, but there is no 401(k) component.

Or, they take a 'loan' at some point during the year with no paperwork or regard to limits or whatnot.  Or take distributions, allowed or not, and don't tell us, and no 1099-R was ever done.

Is the administration of a one-participant plan less, or even much less, than a plan with more participants?  Sure.  But the work should be greater than 'no annual work.'

[Appleby]

Ascensus charges less than $500 per year - last time I checked- for record-keeping services for individual-K plans ( same thing- just different brand names). If your plan is held with a custodian that uses their ( Ascensus) off the shelf prototype plan document, talk to the custodian.  Good luck

[Bird]

4 hours ago, Appleby said:

Ascensus charges less than $500 per year - last time I checked- for record-keeping services for individual-K plans ( same thing- just different brand names). If your plan is held with a custodian that uses their ( Ascensus) off the shelf prototype plan document, talk to the custodian.  Good luck

And just for the record (sly grin as you see where this is going), "record-keeping" may or may not include "third party administration" functions.  So they might keep track of the sources but not do compliance or 5500 work.  I don't know but just wanted to give a warning so everyone doesn't run to Ascensus without understanding the whole picture.

[Appleby]

On 1/13/2022 at 10:16 AM, Bird said:

And just for the record (sly grin as you see where this is going), "record-keeping" may or may not include "third party administration" functions.  So they might keep track of the sources but not do compliance or 5500 work.  I don't know but just wanted to give a warning so everyone doesn't run to Ascensus without understanding the whole picture.

😄- great point. They do the 5500.

[BG5150]

18 hours ago, Appleby said:

😄- great point. They do the 5500.

Do they do anything else?  Like check the appropriateness of the contributions?  make the employer certify they have no other employees, or that those employees do not qualify for the plan?  Keep the documents up to date?

[Catch22PGM]

On 1/21/2022 at 10:51 AM, BG5150 said:

Do they do anything else?  Like check the appropriateness of the contributions?  make the employer certify they have no other employees, or that those employees do not qualify for the plan?  Keep the documents up to date?

I have plenty of experience taking over "solo-401(k) plans" from the specific recordkeeper mentioned in this string. Most have had significant compliance problems. My top-3 favorites:

1. Plan doc was set-up with no service requirement. Plan sponsor hired two part-time employees who were working 100 hours per month. There was no TPA so nobody bothered to ask about employees. 3 years later an advisor who knows what they are doing is hired and calls their favorite TPA because something smelled fishy.

2. The recordkeeper allowed the plan sponsor to take a loan from their 401(k) plan with a 1% interest rate (not prime + 1%, but exactly 1%).

3. Exactly what BG5150 mentioned in this thread - the recordkeeper allowed the plan sponsor to dump in the 415 limit every year even though the compensation could not support the deduction (this went on for 5 straight years).

Long story short - always use a TPA.