Opening of SEP account

[Rai401k]

I have one employee, I am starting a SEP for 2003.

1. Do I have to open the account by either 12/31/2003 or 3/15/2004.

2. Can i fund account at any time prior to filing of my corp. return

3. My employee would like to have his account at Schwab, I prefer Vanguard can this be accomplished.

Thanx

[Mike Preston]

1. Due date of your tax return. If you go on extension, that would be 9/15/2004

2. Yes

3. You set up the SEP-IRA at a single institution. That institution will have separate IRA accounts for all participants. Once you deposit money into those IRA's the IRA owners can transfer the monies to any IRA they want.

[Appleby]

3. You set up the SEP-IRA at a single institution. That institution will have separate IRA accounts for all participants. Once you deposit money into those IRA's the IRA owners can transfer the monies to any IRA they want.

Mike, since the funding vehicle for the SEP is a traditional IRA, wouldn’t you agree that if the employer uses the IRS model SEP documents, each participant may establish their SEP IRAs at any financial institution they choose- not necessarily the one at which the employer established the SEP plan? I hear some prototypes may require all IRAs under the SEP plan to be held with their institution- I have never actually seen one….

[Mike Preston]

You may be right, but I've never dealt with a SEP at an institution that would consider anything other than opening an account for everybody listed on the forms that they provide to the SEP adopter. I suppose if the forms weren't filled out right (only listed 2 employees, but they had 4) but as long as the correct amounts were deposited into the respective IRA's it might be ok. Talk about an administrative nightmare from the employer's perspective, though.

[Appleby]

From my experience, the only forms that are returned to the financial institution are the participant's IRA Adoption agreement and a copy of the employer’s SEP adoption agreement (5305-SEP Etc.). Neither of these would provide any indication of the number of employees participating in the employer’s SEP IRA. Maybe my experience is limited

I am not sure how maintaining SEP IRAs at different financial institutions could increase (or result in) any administrative burden for the employer, since IRA balances are not usually factored in any testing...and the employer would use the year’s contribution for any administrative purposes... Could you elaborate on that?

[Mike Preston]

Just that keeping track of where to send the monies, when different employees have accounts at different locations, seems overly burdensome to me.

[Gary Lesser]

I've never seem a prototype document that actually requires the use of the sponsor's IRA (although having at least one IRA with the sponsor assures that amendments and notices will be sent; and that the plans adoption as a SEP-IRA

is complete). They can also be used with model IRAs. Most prototype documents suggest that the sponsor's (or some other IRA) may/can be used in connection with its establishment. Small burden to pay for simplicity.