The case of the solo 401(k) and the missing 5500s
Plan Sponsor Scenario
A business owner looking to set up a solo 401(k) plan went directly to a retirement plan provider without engaging an experienced financial advisor or a third party administrator (TPA). The individual wasn’t informed that they were supposed to file a Form 5500 once their assets reached $250,000. So, the business owner continued the plan year after year. However, he was not in compliance because he didn’t file an annual Form 5500 when required. The owner began working with an experienced financial advisor who reviewed their plan and realized there could be an issue. They called EGPS to get the advice of our Compliance Team. Then, we directed them on appropriate next steps for this retirement plan compliance issue.
EGPS Action and Outcome
The EGPS Compliance Team reviewed the plan documents and files and discovered that the previous years’ 5500s should still be filed. We prepared the forms and assisted the employer with the IRS’s delinquent filer program. This saved the business owner from incurring costly penalties down the road from the IRS. EGPS continues to work with the employer to keep the plan in compliance. We provide document services, plan reporting, and other plan administration services.
Key Learnings
With all the complexities and regulations associated with retirement plans, it’s nearly impossible for a business owner to comply with all of them without engaging expert. Hiring an experienced financial advisor and TPA to educate business owners and manage retirement plan compliance is a must to ensure costly errors won’t occur or go unresolved.
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