Termination of SARSEP

[Lori Foresz]

Hello,

Employer has a grandfathered SARSEP and will be setting up a crosss-tested 401(k) PSP during the same year as the SARSEP in order to maximize disparity of ER contributions. They currently make a 6% SARSEP contribution on behalf of all employees.

I understand that the 402(g) and 415 limits apply to the combined plans and we are keeping that in mind when determining the max contribs to the PSP. I also think (but am not 100% sure) that the contributions to the SARSEP (both ER and EE) are not included in the General Test (i.e. the ABT) portion of the PSP. In other words, SEPS are not part of the ABR testing group.

Can anyone confirm this? Thanks so much!!

[Gary Lesser]

Do you mean a 6 percent employer contribution to a SEP and employee elective under a SARSEP? Or, did all eligibles elect 6 percent?

Employer's can not make "elective" contributions on "behalf" of employees other than by (under) a valid salary reduction agreement.

I believe that each plan must be separately tested for discrimination. Combined limits would generally apply under 415 and 402(g). The SEP contributions reduce the otherwise applicable P/S deduction (plus elective) limit on a dollar for dollar basis.