Most new clients come to us with a retirement plan already in place. Usually this is a SEP or a solo 401k.
SEPs do not combine well with defined benefit plans. But solo 401k plans work great, even though the profit sharing is limited to 6%.
Many people have not filed a form 5500-EZ for their 401k plan. Often this is because the amount in the plan is less than $250,000, so no 5500-EZ is required. Sometimes it has not been done because the client did not know that it was required and just assumed that the custodian was taking care of it.
The reality is that if you have a plan set up with a custodian (Schwab, Vanguard, Fidelity, etc) they will typically make you sign a disclaimer that states that you are in charge of the administration of your plan. This would include filing the 5500-EZ. So it is quite possible that a 5500-EZ has never been filed.
When people come to use with a 401k that we did not set up, we do not take over the administration of it unless it is expressly requested and the appropriate administration fee is paid. When we set up new cash balance plans or defined benefit plans, we tell clients that we will only handle administration of the plan if the client requests.
When you set up a new defined benefit plan or cash balance plan with us, we do not automatically take over the administration of your 401k plan. We do have to cross test the plans and review compliance. But that doesn’t mean that we are doing your 5500-EZ. You may have not even filed a 5500-EZ before for your 401k plan because your balance was less than $250,000. But when you add a defined benefit plan you will normally quickly be over the $250,000 threshold and you will now be faced with filing the return.
Contact your 401k custodian
You should contact your current custodian to verify what services they are providing for you. Below are the phone numbers for the main three custodians that most clients use.
Vanguard at 1-800-992-7188
Fidelity at 1–800-544-5373
Charles Schwab at 1-800-435-4000.
