Deferrals withheld between MEP and Single Employer Plan

Here is my situation. A sponsor left a PEO but hasn't yet established a single employer plan to accept money from the previous plan. During this time the sponsor continued withholding deferrals from paychecks based on deferral elections related to the PEO. Would a new single employer plan be able to accept these deferral contributions if new enrollment forms with deferral elections and investment choices hadn't yet been completed???

The new plan will be a spinoff of the old plan. You should be able to continue the old elections for the time being.

Are the deferrals going into trust or is the employer just hanging on to them? That's what makes me nervous about your scenario. 

The sponsor is holding the money as there is no trust to deposit the funds. I assume you are suggesting these would be considered late contributions as far as lost earnings go? Is there another option than just hanging on the the money if not retirement trust is available?

3 minutes ago, Purplemandinga said:

The sponsor is holding the money as there is no trust to deposit the funds. I assume you are suggesting these would be considered late contributions as far as lost earnings go? Is there another option than just hanging on the the money if not retirement trust is available?

If the employer isn't currently a sponsor of a plan, then they can't withhold any deferrals. There isn't a plan that allows it.

12 minutes ago, Bill Presson said:

If the employer isn't currently a sponsor of a plan, then they can't withhold any deferrals. There isn't a plan that allows it.

This is what I was thinking initially. If there was no plan, then how can deferrals be held?

Have they adopted a plan but not set up a trust to accept the funds? Of do they not have any plan at all? If t he later I agree with Bill, no plan, no right to take deferrals.