I've got a question I can't seem to find a difinitive answer to.

I've been contributing to a Money Purchase / Profit Sharing Plan for the last 2 years. It is my understanding I can now (with recent law changes) contribute $40k per year to a SEP IRA (without income limitation). I'd like to scrap my MPP/PSP (and the paperwork) and just contribute to a SEP IRA. My questions are:

1) Can I do this?
2) Can I then rollover my MPP/PSP immediately to my regular IRA?
3) Can I contribute $40k to a SEP IRA even if only make $40k in a year?

Any other issues I should know about?
Thanks.
Jason

1) Yes, you can terminate your MPPP and PSP and roll the assets to a SEP IRA

2) Yes, you can also roll the assets a traditional IRA. However, if you are maintaining a SEP IRA, why bother opening a second IRA? Note that some custodians/trustee do not even make a distinction between traditional and SEP IRAs.

3) No. You are still limited to 25 percent of compensation ( 20 for a sole proprietor that files a schedule C). If you make $40,000, then the most you can contribute to the SEP is $10,000



Note that there IS an income limitation. You may not take into consideration more than $200,000 (index) of compensation for plan purposes