How do I calculate the amount I can contribute to my QRP and profit sharing plan?
You can contribute up to $18,500 per year to your QRP for 2018. ($24,500 if over age 50) See IRS article
The profit sharing plan will allow you to contribute a maximum of $55,000 ($61,000 if over age 50) per year for 2018 which includes the elective deferral amount ($18,500).
The profit sharing portion, which is another way of describing the employer contribution can be up to $35,500 in 2018. 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. So if an employee had $90,000 in wages and the company is an LLC he would be able to receive a maximum of $18,000 in profit sharing. If the company is a corporation, he would be able to receive up to $22,500 in profit sharing. This is in addition to the $18,500 maximum he can contribute from his wages.
What are the ongoing responsibilities and costs involved in a QRP?
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 over $250,000 in assets. 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. We recommend having an advisor file the form which costs less then $1000 a year and puts the professional in between you and the IRS, generally a smart idea.
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. Precious metals firms generally do not do this. Opul Metals provides its clients complimentary and offers this service to anyone holding precious metals for a minimal fee.
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 use the QRP for something that I want to benefit on, or does it have to be a purely on investment?
It does control benefit and you cannot have credit benefit. If you wanted to do something that is for you, then we’d suggest to borrow money out of your plan to use it for that investment. Within the QRP there has to be an investment. The IRS does not want you using your QRP money for “yourself.
If you’re running everything through an QRP and this is your only source of income, you have not yet reached old age, how does that work?
If you’re over 59.5, you probably got some flexibility because you can have money that you’re taking out. If you’re younger than that, you’re going to need some current revenue of some sort. You’re going to have some money that’s making money outside of it because you only borrow 50,000 and then you’re stuck so you’re going to need another source of income, outside of the QRP.
If I have an existing 401k or IRA from an old employer, can I roll that into the new plan?
Yes. There are no taxes to pay or penalties if it is an in-kind roll over