SEP ~ UNIK Comparison!

[Guest Philip Simpkins]

Our firm generally does not provide SEP consulting. We are preparing an illustration comparing SEP/PS/UNIK limits for owner and spouse. Post EGTRRA, we are showing a PS $60,000 contribution allocated $40/$20 between owner ($200K comp) an spouse ($40K comp).

SEPs have the same 415 deduction limits. Do we have the same allocation abilities as the profit sharing plan ~ can spouse receive over 25% of compensation?

[Gary Lesser]

Yes, except that any SEP allocation exceeding 25% of "includible" compensation, plus catch up contributions, is taxable to the participant (although such amounts may be deductible by the employer). Under Code Section 404, the deductible SEP contributions eat up the otherwise applicable P/S limit. Hope this helps.