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  • #16
    Thank you everyone for your responses and advice.

    Our initial medical consultant was a noob and has since been fired. Our lawyer unfortunately was not knowledgeable about retirement accounts and missed it. We are a small group in this multi-group merger so we were kind of just taken for a ride and didn't do much due diligence on our own just relying on what the larger groups were telling us. No one thought to look at the retirement plans during the merger.

    The problem was found after we hired another consulting group and they said that our retirement plans should be looked at to make sure they were all under compliance. This is when they uncovered the problem. Apparently our profit sharing plans are fine even though each group has its own. They advised us to try and consolidate them all for future ease of paper work but that it is not necessary. The cash balance plan though is a problem because only three small groups have them and therefore we don't meet the minimum number to have such a plan. It is not that we can just contribute for more employees, we are all partners per say and would need another 30 people to participate in order for this thing to be ok. The plan was not insured in anyway.

    I am not sure if we told the actuary that we had merged and it is possible that we didn't let him know or we weren't asked. The merger was done just to get a single contract with a large hospital system but nothing else was changed in terms of our day to day work flow or finances. So it felt like nothing had changed.

    The IRS is not involved and the advice we got was not to inform them. We were told just to terminate the plan, roll over the money into an IRA, leave it in there and continue on as nothing happened. No one has suggested to do a voluntary compliance filling. We did get an ERISA firm to confirm the ASG determination and apparently we are stuck there. So the professional help is saying that terminating the plan is the clean up, but they are saying in case anything ever comes of this not to mix the money into any other accounts. The mess would essentially never be cleaned up and thus I don't know if it would be wise to put this money into my profit sharing 401K. If I can't put this money into my 401K then am I stuck not being able to do the roth conversion because of my sizable IRA amount. Is there a way to create another 401K that has nothing to do with my profit sharing account?

    This stuff is way over my head. We have contacted an ERISA firm, but between them and the consultants we aren't getting too much information except that the best coarse of action is just to terminate, roll over and forget about it. Should we look for other experts, any referrals?

    Thanks again everyone for their thoughts.

     

     

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    • #17




      Thank you everyone for your responses and advice.

      Our initial medical consultant was a noob and has since been fired. Our lawyer unfortunately was not knowledgeable about retirement accounts and missed it. We are a small group in this multi-group merger so we were kind of just taken for a ride and didn’t do much due diligence on our own just relying on what the larger groups were telling us. No one thought to look at the retirement plans during the merger.

      The problem was found after we hired another consulting group and they said that our retirement plans should be looked at to make sure they were all under compliance. This is when they uncovered the problem. Apparently our profit sharing plans are fine even though each group has its own. They advised us to try and consolidate them all for future ease of paper work but that it is not necessary. The cash balance plan though is a problem because only three small groups have them and therefore we don’t meet the minimum number to have such a plan. It is not that we can just contribute for more employees, we are all partners per say and would need another 30 people to participate in order for this thing to be ok. The plan was not insured in anyway.

      I am not sure if we told the actuary that we had merged and it is possible that we didn’t let him know or we weren’t asked. The merger was done just to get a single contract with a large hospital system but nothing else was changed in terms of our day to day work flow or finances. So it felt like nothing had changed.

      The IRS is not involved and the advice we got was not to inform them. We were told just to terminate the plan, roll over the money into an IRA, leave it in there and continue on as nothing happened. No one has suggested to do a voluntary compliance filling. We did get an ERISA firm to confirm the ASG determination and apparently we are stuck there. So the professional help is saying that terminating the plan is the clean up, but they are saying in case anything ever comes of this not to mix the money into any other accounts. The mess would essentially never be cleaned up and thus I don’t know if it would be wise to put this money into my profit sharing 401K. If I can’t put this money into my 401K then am I stuck not being able to do the roth conversion because of my sizable IRA amount. Is there a way to create another 401K that has nothing to do with my profit sharing account?

      This stuff is way over my head. We have contacted an ERISA firm, but between them and the consultants we aren’t getting too much information except that the best coarse of action is just to terminate, roll over and forget about it. Should we look for other experts, any referrals?

      Thanks again everyone for their thoughts.

       

       
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      You got a problem right there.  Profit sharing plans are not necessarily fine.  They have to be tested together.  This is a big mistake to assume that they are fine just because you have the same plans. They might be, or they might not be, and this has to be examined by a competent TPA.  Also, it depends on how long you ran your CB plan for, and whether other groups want to do a CB plan as well.  So depending on the timeline you might or might not be able to terminate CB plan without doing anything substantial like a voluntary compliance filing.

      Yes, you should definitely consider consolidating your plans. So all 401k plans should be cleaned up at the same time as you are consolidating, just like CB plan.  ASG means all plans have to be tested together, which is a very expensive exercise (not to mention time consuming).  So whoever you hire to provide services/advice to the ASG groups should know how to go about doing this, from start to finish. I can't believe you are not getting good advice from two different entities who are supposed to be specialists in this field.

      And the advice not to inform IRS and terminate the plan should be based on facts and numbers, same as advice about 'all 401k with profit sharing are OK'.  Do you have a written determination that you have an ASG?  If so, the next steps would be as follows:

      1) You shouldn't terminate anything without cleaning up or at least determining whether you need to clean up or not. This just pushes the barrel down the road.  Either they are not telling you the truth, or they are just telling you what you want to hear.  In either case, they are not acting in your best interest.

      2) Have someone qualified examine both plans and recommend how to wind down the Cash Balance plan, as well as how to fix the 401k plan issues.  A single plan for all will save everyone time and money, in my opinion.  And it will simplify your plan management big time.  Unless there is a reason why groups want to keep all plans separate, in which case they would have to contend with the TPA doing annual testing on all plans together, which might be OK if they are willing to hire a provider to do it (and willing to pay for it).

      I think at this point you want someone independent looking at your situation and recommend a solution.  Last thing you want to do is to shop for solutions that sounds good and seem painless vs. those that will actually address your problem.  I think that if your current providers are unable to figure this out, you should hire those who can do everything from A to Z and tell you exactly what to do.  Good consultants should explain their advice in writing, and help you understand the pitfalls of doing nothing.
      Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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