Small Plan Start Up Cost Credit

[BeanCounterBlues]

To qualify for this credit, the employer must not have had within the last three years another qualified plan covering similiar ee's. I've read some commentary that "qualifed plan" for these purposes means any plan such as those that aren't "qualified" under ERISA like SEP's.

What exactly does "qualified" mean here? I have a new 401k plan, effectively that replaced the old SARSEP. Same ee's covered. Can this client take the Form 8881 credit or does the SARSEP knock them out?

Thanks for any help.

[Bird]

I don't remember the source but I'm confident that a SARSEP (which is a form of a SEP) knocks them out. This is language that I had in a newsletter; I'm sure I lifted it from an IRS publication of some sort:

An eligible employer plan includes:

any qualified pension, profit-sharing, or stock bonus plan which includes an exempt trust,

a qualified annuity plan,

a simplified employee pension, and

any simple retirement account (i.e., any SIMPLE IRA).