SEP for owner while 401(k) maintained for staff?

[Guest hpaine]

Excuse me for this mundane question, but my knowledge on SEP's is a little weak. I have a client that set up a SEP for himself only. Can this client maintain his own SEP and adopt our 401(k) plan for his employees?

Thanks for your assistance.

[Mike Preston]

The answer is that there is no answer possible based on the information that you have given. In some circumstances, yes. In others, no.

But there is no prohibition against having both a SEP and a 401(k).

For example, the SEP might have the box checked that requires one to work in at least 3 of the last 5 years. In that case, maybe the owner is the only one that satisfies that criteria. The 401(k) will have, at maximum, 1 year eligibility and therefore some of the employees would be eligible for the 401(k) but not for the SEP.

It is also possible that the SEP is supposed to cover everybody and the client is just blissfully unaware of the requirement that a SEP cover everybody who satisfies the eligibility criteria.

[Appleby]

Bear in mind that an employer who maintains a qualified plan ( such as a money purchase pension, profit sharing 401(k), defined benefit plan…) and a SEP cannot use the 5305-SEP form. …instead , the SEP must be a prototype SEP or an individually designed SEP

[Gary Lesser]

And the plans for this sole-proprietorship (?) may be top-heavy, too. All eligible employees must be considered; considering employees of all "related" entities. More facts would be helpful.