Jump to content

SEP and 401k together


Recommended Posts

Employer has a SEP requiring 3 years in last 5, wants to contribute max allowed.

Employer is considering a 401k with one year eligibility as a safe-harbor plan.

Key is only person getting SEP for current year because other employees don't have 3 calendar years employed.

Three questions:

1. If 401k is a safe-harbor match, do we avoid aggregating plans for 401a4 discrimination testing, 401k or 401m testing?

2. If 401k is a 3% SHNEC, do we avoid aggregating plans?

3. What is effect of top-heavy?

Link to comment
Share on other sites

The SEP cannot discriminate in favor of HCEs and must cover all ee with service in 3 of last 5 years. The SH provision permits another arrangement that meets the requirements for a SH to be treated as a SH for those ees eligible under such arrangement. IRC 401(k)(12)(F). SEPS are subject to the TH rules for those NHCEs who meet the eligibility requirements. I dont know if the final 401k regs answer your Q. Only aggregation I am aware of is 415 limits.

Havent done the reasearch but er should be able to contribute to SEP for this yr for himself and maintain a SH plan for all eligible ees with contributions to both plans aggregated under the 415 limits and no TH requirement for the SEP if no other ees are eligible to participate in 05.

mjb

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...