How do I calculate the amount I can contribute to my eQRP and profit sharing plan?
You can contribute up to $19,500 per year to your eQRP® for 2020. ($25,500 if over age 50) See IRS article
The profit sharing plan will allow you to contribute a maximum of $56,500 ($63,000 if over age 50) per year for 2020 which includes the elective deferral amount ($19,500).
The profit sharing portion, which is another way of describing the employer contribution can be up to $37,000 in 2020. This amount is a maximum of 20% of the wages received by the employee if the business is a sole proprietorship, partnership or LLC.
If the business is a corporation, the maximum employer contribution is 25% of the wages.
What are the ongoing responsibilities and costs involved in a eQRP?
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 the plan has over $250,000 in assets or has 100+ employees. If you have less then $250,000 and less then 100 employees you are exempt from filing this form. You can file the form online or you can have your CPA file the form.
We recommend having your CPA file the form, generally costing less then $1000 a year.
Any asset like real estate or precious metals requires an annual statement of value or appraisal by a third party. Precious metals firms generally do not do this.
MGA LLC provides a valuation service to its clients and offers the annual valuation service to anyone holding precious metals for $125 per year.
A plan must have at least one fiduciary (a person or entity) named in the written plan, or through a process described in the plan, as having control over the plan’s operation. The named fiduciary can be identified by office or by name. For some plans, it may be an administrative committee or a company’s board of directors.
The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions. Prudence focuses on the process for making fiduciary decisions. Therefore, it is wise to document decisions and the basis for those decisions. For instance, in hiring any plan service provider, a fiduciary may want to survey a number of potential providers, asking for the same information and providing the same requirements. By doing so, a fiduciary can document the process and make a meaningful comparison and selection.
Can I personally benefit from the eQRP today?
Your plan is meant to be a retirement plan for your benefit in retirement. Any current benefit you receive today is disqualified. This includes receiving a commission for a property your plan purchases, a salary from a company your plan owns a controlling interest in or living in a property your plan purchases. Just remember, no current benefit and if you have questions, call our plan advisor.
If you want to access the funds for something disqualified you are generally eligible to borrow up to 50% or $50,000 from your plan as a personal loan and use the money for anything you’d like. This is allowed as long as you pay the plan back according to an amortized schedule of repayment over five years or less.
If I have an existing 401(k) or IRA from an old employer, can I roll that into the new plan?
Yes, you can roll as many old 401(k), 403b, 457, Self-Directed IRA or other IRAs into your eQRP.
ROTH IRAs as well as inherited IRAs are prohibited from being rolled over. See the IRS guidelines here.
There are no taxes to pay or penalties if it is an in-kind roll over