How complicated is reporting to the IRS?
If you have over $250,000 in assets, there’s a form (5500) that has to be filled out. And if you don’t, you might still want to fill it out. It’s not complicated. You’re basically saying, “Here’s the assets, here’s the value,” and there you go. It’s really not that big of a deal and an accountant can take care of it for you easily.
What are my responsibilities and costs involved in QRP administration?
Once you’re set up you’ll generally have little or no ongoing expenses. You are required to file a form 5500 with the IRS if you plan has $250,000 in assets or more. If you have less then $250,000 and less then 100 employees you’re exempt from filing this form. You can file the form yourself online or you can have an advisor file the form.
Any asset like real estate or precious metals requires a statement of value or appraisal at least once a year to be used for compliance with plan asset value reporting.
Your flat annual fee covers all plan updates, state filing fees and resident agent fees for your LLC as well as unlimited plan consulting.
Is the QRP set up so I'm the administrator, or can someone else be the administrator? What are the duties of an administrator?
You can be the administrator or hire a 3rd party to be the administrator.
- Make contributions in accordance to the plan.
- Keep the plan up to date and in compliance with all retirement plan laws.
- Invest plan assets in accordance to the plan.
- Provide information and required disclosures to plan participants.
- Distribute benefits in accordance with the plan.
- Inform eligible employees about the plan.
Under law how long must plan administer or plan provider keep 401(k)-related records?
The requirement is that records must be retained for 6 years. Records used to compile information that is required to be reported under the reporting and disclosure rules must be preserved by plan administrators (and by actuaries, accountants and others who may be involved) for 6 years after the due date for filing the documents to which they relate (ERISA Sec. 107). These records must have sufficient detail to permit the necessary basic information and data to be verified, explained or clarified for accuracy and are to include vouchers, worksheets, receipts, and applicable resolutions.
Accidental destruction of records will not discharge the persons required to retain records from their statutory duty with regard to the purposes for which such records are required to be retained. Where persons required to retain records know or should know that such reconstruction is impossible, or possible only at an excessive or unreasonable cost, such persons would not be under a duty to reconstruct or attempt to reconstruct the lost or destroyed records.
Do I have to file anything with the IRS?
YES, after your QRP is setup you will need to file Form 5500 once a year if your plan assets are over $250,000, otherwise you are exempt from a filing. One reason people will file the form even before they have $250,000 in assets is to start the 3 year audit clock.
For the 2018 year if my company is a Sole Proprietorship, LLC or Corporation how much time do I have to make contributions to my plan and take a tax deduction?
The deadline to make contributions for tax year 2018 is the date you file the return for the plan sponsor in 2019, including any extensions.
What is a 990T?
The 990T is the form used to report Unrelated Business Income Tax. If your QRP had active income that was taxed you would likely use this form.
What are the QRP Loan Rules?
This example will give you an idea of the formula and practical application for a 2nd loan while 1 is still in place (in terms of using it like a line of credit)
Here's a QRP Loan Podcast the IRS did on this as well:
- You can prepay anytime.
- Interest Rate - most common is prime plus 1 but it is at your discretion as the plan administrator and trustee. The IRS doesn't say what the rate is only that it must be reasonable. Here's an SEC article stating the prime +1
- You can borrow anytime you have eligible funds ( but as you'll see from the formula if you paid off a maxed out $50k loan (if you had $100k or more in QRP assets) that you took out within the last 12 months you would need to wait to do another loan until the 1 year anniversary to re-borrow the full $50k or even anything because you've maxed the formula). Please see previous formula link above.