Goodbye SEP, hello 401k

[Guest R. Daestrom]

Small company currently has a SEP, but would like to have a 401k instead. They like the 3% safe harbor that would allow the 2 owners to defer maximum. Fiscal year end is 6/30 and they would like plan year to be the same.

Since they currently have a SEP (which they will terminate), is it too late for them to implement a S/H 401(k) for the 2003/2004 plan year? Would they run into the Notice problem since it is less than 30 days before the start of the plan year?

Thank you

[goldtpa]

A brand new plan must have at least 3 months remaining in the year to immediately start a safe harbor.

An exception to the 3 month rule exists for a brand new company. A brand new company may establish a safe harbor 401(k) plan if there is one month remaining in the plan year