SEP IRA eligibility

[Guest ButchElfers]

Is there any reason why you could not use a non-whole number (ie. 1.5 years) as the eligibility requirement for the SEP?

The company is two years old and some of the non-key employees do not have 1.5 full yrs of service, and the employer would like to exclude them in this first year.

Thanks,

[Gary Lesser]

The phrase "has performed service for the employer during at least of the 3 immediately preceeding 5 years" (i.e., either plan or calendar years) found in Code Section 408(k)(2)(B) would seem to preclude the use of a fractional part of a year. The rules were intended to be simplified; service perforned at any time within the year would count as service for that "year." Thus, a plan that contained a "1.5" years of service requirement would be operated in the same manner as if it said "2" years.