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SEP IRA - participant question


st3rv
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I am a small business owner (sole proprietorship / schedule C) interested in opening a SEP plan for my 2 employees. I understand that I have to contribute a similar % of their salaries, however I would prefer not to make contributions for myself as the owner / employer. If I don't make contributions for myself, does that prevent me from helping my 2 employees equally with their SEP?

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13 minutes ago, Bird said:

There is no flexibility on SEP-IRA contributions; you can't waive your own share.

Thank you, this is what I was afraid of. As I am 60 I suppose I could contribute and distribute my own share immediately?

Are there any better plans that come to mind for my situation where I can make somewhat large contributions to employees only? I have an old unused Keogh plan but I believe it is subject to the same rule.

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You certainly can establish a profit sharing plan and just exclude owners. You can, if you wish, make it a 401(k) plan so that your employees also have an opportunity to defer. Talk to a local TPA, who can guide through the best options.

Yes, you can contribute to the SEP and withdraw, but there may be fees/loads for doing so.

I do cringe when I hear things like "old unused Keogh plan." Does this plan have money in it? Have you kept it up to date with document amendments and restatements, etc.? Are you filing 5500 forms if applicable? I just mention this as an item you should be aware of, and make sure all is ok.

Again, I recommend you speak to a local TPA.  Your situation doesn't sound complicated.

 

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3 minutes ago, Belgarath said:

You certainly can establish a profit sharing plan and just exclude owners. You can, if you wish, make it a 401(k) plan so that your employees also have an opportunity to defer. Talk to a local TPA, who can guide through the best options.

Yes, you can contribute to the SEP and withdraw, but there may be fees/loads for doing so.

I do cringe when I hear things like "old unused Keogh plan." Does this plan have money in it? Have you kept it up to date with document amendments and restatements, etc.? Are you filing 5500 forms if applicable? I just mention this as an item you should be aware of, and make sure all is ok.

Again, I recommend you speak to a local TPA.  Your situation doesn't sound complicated.

 

Thank you for your reply! It is described by TD Ameritrade as a Keogh Profit Sharing Plan and you are right on the money as I did not manage it very well (late 5500 filing, addressed now) which led me to this discussion board in the first place last year! Maybe I should modify it to exclude owners and add my employees as participants then.

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I was finally able to talk to someone at TD Ameritrade and asked to amend my profit sharing plan to exclude owners but they did not know how to handle it and could just change the contribution formula from prorata to integrated. Is it possible that TD Ameritrade does not allow this or do all profit sharing plans allow that option?

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51 minutes ago, st3rv said:

I was finally able to talk to someone at TD Ameritrade and asked to amend my profit sharing plan to exclude owners but they did not know how to handle it and could just change the contribution formula from prorata to integrated. Is it possible that TD Ameritrade does not allow this or do all profit sharing plans allow that option?

It's legal. They just don't know what to do.

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William C. Presson, ERPA, APA, QPA, QKA, APR
bill.presson@gmail.com
C 205.994.4070
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43 minutes ago, st3rv said:

Since they don't have a system in place to make such amendments nor such an option for new plans, could I be in trouble with DOL/IRS for writing the amendment myself and simply send it to them as the contribution setup itself is legal?

If you make changes to the document that aren't allowed by the document, it eliminates the preapproved status. You don't want to do that. You should hire a TPA to help you. Let me know generally where you're located and I'll see if I can recommend someone.

But you don't want to jeopardize the tax status of your retirement. Spend a little money and get it done correctly.

William C. Presson, ERPA, APA, QPA, QKA, APR
bill.presson@gmail.com
C 205.994.4070
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4 hours ago, Barbara said:

There are many TPAs in the Valley who can help you.  You can hire one of those TPAs, they will take over the plan, and then you can roll over the TD Ameritrade assets into it. I can help you if you don't find anyone else; I'm in LA.

 

Thank you for this explanation. I get it now!

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