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SEP are excluded from calculating the $250K threshold because the SEP is considered an IRA. The 5500EZ instructions say to "You should use the total plan assets as listed as of the end of the plan year on line 6a(2) of this form to determine whether the plan(s) assets exceed $250,000. If an employer maintains one or more one-participant plans, the total assets of all one-participant plans combined must be counted towards the amount of $250,000." Since SEPs don't file a 5500 EZ, the SEP assets are not included in the determination.

Kenneth is correct. The SEP assets are in an IRA and dont count as qualified plan assets. Just don’t put any more money in the SEP either.

I seem to recall this being asked (and answered, not by me) before in this forum and thought that SEPs do not count for such purpose as they have no such annual filing requirements regardless of the amount of assets. I suggest searching.

Thank you!

Here’s an IRS site that says SEP money doesn’t count for filing 5500EZ. https://www.irs.gov/retirement-plans/financial-advisors-are-assets-in-your-clients-one-participant-plans-more-than-250000

I think Lou S. offers the correct analysis. If the attorney is getting a K-1 or W-2, he is still employed and does not need to take the RMD. If he is getting a 1099, then he has term'd employment and does need to take the RMD.

While Gadgetfreak is right to mention the 5%-owner variation, consider further that whether a participant is or was “a 5-percent owner (as defined in section 416)” for § 401(a)(9) is determined “with respect to the plan year ending in the calendar year in which the employee attains the applicable age[.]” Internal Revenue Code of 1986 (26 U.S.C.) § 401(a)(9)(C)(ii)(I). “For purposes of section 401(a)(9), a 5-percent owner is [a participant] who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the [participant] attains the applicable age.” 26 C.F.R. § 1.401(a)(9)-2(b)(3)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(3)(ii). Nancy’s query supposes that the lawyer “changed status . . . in 2021 when he attained age 70.” Many law firms’ partnership agreements provide age 70 as a mandatory or presumptive retirement age. Often, a retired partner continues working, but on a less active schedule. A change in classification from an active partner to an inactive or retired partner often involves adjusting or redeeming a partner’s capital interests, profits interests, or both. By 2024 or the other relevant year in which the participant reached age 73, he might no longer have been a 5% owner. For a participant not constrained by the 5%-owner variation, one’s required beginning date might follow from the later of one’s applicable age and “[t]he calendar year in which the [participant] retires from employment with the employer maintaining the plan.” 26 C.F.R. § 1.401(a)(9)-2(b)(1)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(1)(ii). Again, a service provider might suggest that the plan’s administrator check carefully the facts and consider prudently how relevant law applies regarding the facts found.

In lawyers’ and law firms’ lingo, the label “of counsel” has no one settled meaning. It can relate to any of many kinds of relationships. It can, in context, refer to a current partner, a retired partner, an employee, or a nonemployee contractor. Does the of-counsel lawyer provide any service? Even having a lunch conversation with a client’s inside counsel or executive to help keep the client content with the relationship might be a valuable service. Don’t reflexively assume this person is retired. Suggest the plan’s administrator decide whether the participant is or isn’t retired (in the sense Internal Revenue Code § 401(a)(9) uses that word). If the law firm feels unready to interpret § 401(a)(9) and how it applies regarding the facts, you can suggest that the firm might get another lawyer’s advice.

I’m very glad you responded, and with the useful information you added. It’s information I otherwise would lack because the last time I had responsibility to get an IRS opinion or determination letter on the form of a plan’s documents was in the 1990s. And your story reinforces the point that there can be, and sometimes need to be, different defined terms for different provisions.

Sigh.

Right. It's both. It is a new plan, but since you are merging a spinoff of the MEP into your new individual employer plan it is a continuation for purposes of counting service, vesting, no cut-back, etc.