Wants to convert from SEP to DB Plan in 2004

[Guest JVH]

Small professional corporation has an SEP for one older professional and 3 or 4 young staff members. The owner has contributed $40,000 to the SEP in January for 2004, but now would like to switch to a DB plan and contribute considerably more money.

Can the $40,000 plus earnings be returned as an overage for 2004? If yes, how are the returned earnings calculated (just compute actual earnings?)?

Is it the case that SEPs are not like a Simple that you could not fund the Simple and a DB Plan in the same year, but you could fund a SEP and DB plan in the same year?

Could the $40,000 in the SEP be left alone for 2004 and then fund the rest of what could be contributed to a DB plan for 2004 into the DB plan?

[Appleby]

You mentioned $40,000 – for whom? All the employees-each? The answer may determine the response to your first question.

You may fund/maintain a SEP and a DB plan in the same year, however, the SEP cannot be a 5305-SEP, instead it must be a prototype or individually designed SEP.