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SEP and 401(k) Profit Sharing


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Business owner over 50 has a SEP. He has contributed a few thousand to the SEP already for 2013. He wants to start a 401(k) for 2013 to get the additional catchup deduction.

Is the limit on the combined plans the same as if he only had the 401(k) profit sharing?

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See IRS Pub 560, page 6, last paragraph in the middle column. http://www.irs.gov/pub/irs-pdf/p560.pdf

And if he's has a 5305-SEP model plan, then he can't maintain a qualifed plan. Would need to switch to a non-model SEP plan. See form 5305-SEP.

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  • 3 weeks later...

Thanks

Can he withdraw his 2013 SEP contribution, then put the max in a 401k profit sharing plan?

No. The withdrawal does not 'void' the contribution- as a result, such an approach would result in an excess contribution.

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

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  • 4 weeks later...

The desired result is to make salary deferral contributions of 23,000 and profit sharing contributions of 33,500. Is there any combination of activities, including terminationg the SEP and rolling it over to a new profit sharing plan, that would allow the maximum contributions desired?

Pub 560 (such as I can find) only references the total dc max limit that applies to a combination of SEP and another dc plan.

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