7.5% Gateway with SEP

[Gary Lesser]

Can contributions under a prototype SEP be considered in the testing of a 412(i) plan for 410(b)/401(a)(4) DC/DB aggregation when carving out employees using the 7.5% gateway? If so, must the DC(SEP) be adopted by 12.31.03 to be considered with a 2003 412(i) plan, or can it be installed by tax filing due date?

My gut says "no," but does anybody have any cites, logic, or reasoning, one way or another? THX.

[Belgarath]

That's a good one! My gut agrees with yours. I find nothing in the regulations which permits this, nor do I think that a SEP is included in the definition of a "plan" as discussed in the 401(a)(4) regs for these purposes. I'm not sure if this was intentional or an oversight by the Service, but I suppose there could be all kinds of problems, such as the SEP eligibility allowances, which are much more liberal. Anyway, I have no cites, only gut feeling like you. Absent finding something in the regs which DOES say you can, I wouldn't do it myself...

[AndyH]

The question would seem to presuppose that it is ok to cross test a SEP and aggregate it with a general tested 412(i) plan, neither of which I'm sure you can do. I'd like to know what others think. I agree with Belgarath that SEPs do not seem to be considered a "plan" within this context, but that this is not entirely clear.

[Blinky the 3-eyed Fish]

I just had to look this up and agree it could be clearer, but don't think it is permissible. 1.410(b)-7(a) defines a plan for purposes of the section as one within the meaning of 401(a) or 403(a), so obviously a SEP is not within this definition. Sal states that a SEP cannot be aggregated on page 8.72 of the 2003 edition of the ERISA Outline Book, but gives no cites.