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Client has SEP wants 401(k)


Guest amm19
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Can someone point me in the right direction whether or not a new 401(k) can be implemented while currently maintaining a SEP? I know that there can be no overlap of SIMPLE pland and another qualified plans, but cannot locate whether or not this applies for a SEP as well. Thanks!

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Guest Fishchick

If the company uses the IRS Model 5305-SEP, it specifically excludes the employer from using the plan if it currently maintains (meaning funds for the same plan year) a qualified plan. See pg 1 under "When not to use Form 5305-SEP"

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Thanks fishchick. I saw that as well. In this instance, the SEP is already in place and has been for several years. They have made a contribution in January 03 for the SEP but approved the establishment of a 401k to add deferrals. So, in this case, it is the reverse of what was described in the model 5305 form.

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Guest Fishchick

that may be, but if SEP contributions are made, they would be made under the plan document already in place, which would mean that if the employer uses 5305-SEP, they would have to restate to a non-model SEP that allows for the combination of 401k and SEP contributions in order to be able to do both.

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