Sole Prop and Corp Solo 401k question

Hello,

A new member and would like to thank all contributors here on this forum. Have been going over some posts and found them to be very informative.

My question:

I have a sole prop (and a Self-employed 401k plan with Fidelity) for the past few years.

Earlier this year I've created a new entity - A 'S' corp and "gradually" moved all contracts to that 'S' corp. 

The sole prop will be out of existence after this year.

My understanding is that I can use my existing Sole Prop 401k plan with my 'S' corp. I need to change the Sponsor name and EIN on 5500SF and that would work.

Does anyone see any issue with this? OR

Is it better to create a brand new plan under new 'S' corp and transfer assets from my Sole prop 401k plan to the new plan and then terminate the old plan?

Thank you for your assistance.

Unless there is other stuff not readily apparent, no issue at all.  It is usually (99.999% of the time) NOT better to create a brand new plan.

@Mike Preston: Thank you for the response.

Could you provide scenario of 'other stuff' that you mentioned? 

Forgot to mention that I have no employees

I think Mike is alluding to if the Plan has some compliance or document problems.

If the Plan is "clean" it is almost always easier to simply amend the existing Plan to have the new entity adopt as the Sponsor of the Plan.

Fidelity's Self-Employed 401(k) Adoption Agreement, specifically allows for this.

Under 2. Employer, B. The term “Employer” includes the following Affiliated Employers covered by the Plan: 

Why not follow Mike and Lou's suggestion and amend the plan with the new affiliated employer.

What Lou said.  I don't spend too much time focusing on 00.001% issues. Suffice it to say that if you had one, it should be readily apparent to a professional. Just because the likelihood is low doesn't mean there are only limited circumstances.  In fact, the list is quite long.  As Lou alluded to, they all boil down to reasons why you might want to wall off the old before contributing to the new.  Other than compliance issues with the old plan, if you were married at one point and separated on 12/31/2016 you might want to wall off the old from the new.   Again, just common sense stuff.

11 hours ago, spiritrider said:

Fidelity's Self-Employed 401(k) Adoption Agreement, specifically allows for this.

Under 2. Employer, B. The term “Employer” includes the following Affiliated Employers covered by the Plan: 

Why not follow Mike and Lou's suggestion and amend the plan with the new affiliated employer.

Thanks for your response.

Just to clarify - Was not thinking of "Affiliated Employers" since Sole prop will not be in existence after this year. Was thinking of

Sole Prop - ABC, EIN - 123, Plan was ABC-001

S Corp - DEF, EIN-456

Would like to

1)Change plan name to DEF-001 and

2)Change Employer to 'S' Corp and

3)Change Name and EIN of Plan Sponsor to 'S' Corp data.

Which of the above steps would not work?

Am not sure how you got the impression that I wasn't following Mike's and Lou's suggestions. I'm sure you're mistaken here.

10 hours ago, Mike Preston said:

What Lou said.  I don't spend too much time focusing on 00.001% issues. Suffice it to say that if you had one, it should be readily apparent to a professional. Just because the likelihood is low doesn't mean there are only limited circumstances.  In fact, the list is quite long.  As Lou alluded to, they all boil down to reasons why you might want to wall off the old before contributing to the new.  Other than compliance issues with the old plan, if you were married at one point and separated on 12/31/2016 you might want to wall off the old from the new.   Again, just common sense stuff.

Thanks Mike.

That makes sense. So yeah, no special circumstance so I think I should be fine. I see on 5500 that one can change the Plan Sponsor Name and EIN but can I

Change Plan Name - ABC-001 to DEF-001 or does the plan name remain CONSTANT?

Thanks,

Personally, I'd leave the plan name alone if at all possible, but that's just me.  There are people who will be very confused if the plan name remains, for example, "The MKaufman Sole Proprietor 401(k) Plan" when the plan sponsor has been changed to "MKaufman, Inc.".  So, at the same time that the S-Corp. signs on to the plan as the Plan Sponsor you most assuredly can change the name of the plan.  But you could have named the plan: "The Best Darn 401(k) Plan on the Planet" with the sponsor being your sole prop.  Had you done that you could easily leave the plan name alone and just change the Plan Sponsor.  But you probably didn't name it that way, huh?

21 minutes ago, Mike Preston said:

Personally, I'd leave the plan name alone if at all possible, but that's just me.  There are people who will be very confused if the plan name remains, for example, "The MKaufman Sole Proprietor 401(k) Plan" when the plan sponsor has been changed to "MKaufman, Inc.".  So, at the same time that the S-Corp. signs on to the plan as the Plan Sponsor you most assuredly can change the name of the plan.  But you could have named the plan: "The Best Darn 401(k) Plan on the Planet" with the sponsor being your sole prop.  Had you done that you could easily leave the plan name alone and just change the Plan Sponsor.  But you probably didn't name it that way, huh?

Of course not :-)  That would have made things easy and where's the fun there? :-)

But jokes aside, now that the name is ABC-001, I do not see a place where I can change Plan Name as well as on 5500-SF to signify the change in Plan Name, unless I've missed those

This is why we get the big bucks. 

The 5500 series doesn't have a place for specifically identifying plan name changes.  Change at will from year to year and the IRS/EBSA/DOL won't care.  What they use to keep track of things is the Plan Sponsor and the EIN of the Plan Sponsor. You report changes there on line 4 of the 5500-SF.  It is extremely esoteric.  Strangely enough, it works.  But it is not intuitive.

Once you  have done a few thousand, it will be like water off a duck's back. 

Thanks Mike. That helps.
I have to see if Fidelity would allow me to change the name without any issue or if they'll create any roadblocks. 

Perhaps I can have a nice name, my initials "MKK-Plan", that would never change no matter what corporate entity I have.

Thanks again.

18 hours ago, Mike Preston said:

This is why we get the big bucks. 

The 5500 series doesn't have a place for specifically identifying plan name changes.  Change at will from year to year and the IRS/EBSA/DOL won't care.  What they use to keep track of things is the Plan Sponsor and the EIN of the Plan Sponsor. You report changes there on line 4 of the 5500-SF.  It is extremely esoteric.  Strangely enough, it works.  But it is not intuitive.

Once you  have done a few thousand, it will be like water off a duck's back. 

 

But be aware that they often don't actually read line 4 and send a letter to the old plan sponsor insisting that you didn't file a return. At that point you simply direct them to the filing under the new name and point out that it was reported on line 4.

On 11/14/2017 at 4:48 PM, Mike Preston said:

The 5500 series doesn't have a place for specifically identifying plan name changes.

They added line 4c to the 2017 forms for plan name changes 

I don't know who this mkaufman person is, but he/she has some serious juice with the IRS!

On 11/20/2017 at 8:42 PM, Mike Preston said:

I don't know who this mkaufman person is, but he/she has some serious juice with the IRS!

Not sure I understood the above. Would you care to elaborate? Is this a 'trade' joke?

On 11/20/2017 at 8:10 PM, RatherBeGolfing said:

They added line 4c to the 2017 forms for plan name changes 

That is great then. Can change plan name also. 

Now just waiting for Mike to let me know more about juice/IRS