austin3515 Posted September 10, 2014 Share Posted September 10, 2014 Can I discontinue a SEP as of 9/30/2014 (calendar year is the plan year)? Effective 10/1 we want the Er contributions to go to the new 401k/PS plan. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Flyboyjohn Posted September 10, 2014 Share Posted September 10, 2014 Important fact needed to respond: has the employer already made interim SEP contributions for and during 2014? If not, no worries Link to comment Share on other sites More sharing options...
austin3515 Posted September 11, 2014 Author Share Posted September 11, 2014 my bad, yes they fund every pay-period. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Bird Posted September 11, 2014 Share Posted September 11, 2014 I don't think there's any such thing as a short year for a SEP. You either have one or you don't. Could possibly be coordinated with a 401(k) if some contributions have been made. Appleby 1 Ed Snyder Link to comment Share on other sites More sharing options...
austin3515 Posted September 11, 2014 Author Share Posted September 11, 2014 What do you mean coordinated with a 401(k)? If I need a straight percent of pay in the SEP I'm not sure how to do that if I stop mid-year. Or are you suggesting I can somehow take into account the contributions made in the PS Plan? Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Flyboyjohn Posted September 11, 2014 Share Posted September 11, 2014 If you're using the IRS Form 5305-SEP I believe it prohibits any other plan in the same year so adopting a 401k I suppose "blows up" the current year SEP contributions, which I guess means adding them to W-2 wages and telling the employees they may have excess IRA contributions that may need to be withdrawn. I haven't looked at the SEP Fixit Guide but probably a good place to start. If you're fortunate enough to have been using a SEP document that permits "other plans" I guess I'd look at that document to see what it says about co-ordination between the 2. Link to comment Share on other sites More sharing options...
austin3515 Posted September 11, 2014 Author Share Posted September 11, 2014 you're thinking of a SARSEP, which I only know because I just had a similar issue. There is no issue having a SEP and another plan. IF I am mistaken, please let me know, but I believe you will post again acknowledging I am correct... Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
austin3515 Posted September 11, 2014 Author Share Posted September 11, 2014 'Tis I am who am mistaken. I hereby bow down to your extensive expertise Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Gary Lesser Posted October 31, 2014 Share Posted October 31, 2014 Assuming a prototype plan is in place before the plan is terminated a 401(k) plan cd be adopted. Contributions to the SEP are treated as contributions to a profit-sharing plan for purposes of the deduction limits under Code Section 404. See 404(h)(3). I wouldn’t call it a short plan year; but rather a termination or discontinuance of the SEP. Treating a model as defective and participants treating contributions as excesses could get ugly. A decent consultant could handle the calculations under 404 and 415. Hope this helps. Link to comment Share on other sites More sharing options...
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