Annual additions with a SEP and 401(k)

[Guest Tara Curran]

We have a client who terminated their SEP June 30, 2000 and began a 401(k) plan August 1, 2000. The plan document for the 401(k) plan says the limitation year is the plan year. We believe the the compensation limit of $170,000 needs to be prorated for 5/12ths of the year. We also thought the annual additions limit of $30,000 needed to be prorated for 5/12ths of the year. Can anyone gives us some guidance as to the proper treatment here?

[Tom Poje]

Tara:

You might try asking this on the SEP, SARSER and SIMPLE board rather than the 401(k) board. From my experience, Gary Lesser knows everything about SEPs!