Existing SEP-IRA to new SEP IRA

[Guest LifePlanner]

I have a client who had a contributing SEP -IRA with a business partner. The business has concluded its business and the SEP-IRA still exists for both owners. No cotributions are expected or desired to be made for tax year 2007. The client has since started a new business with one employee who will be retiring this calendar year but wants to include a contribution for him for tax year 2007. Can he start a new SEP-IRA for this new business and include one employee if the former partner and his SEP-IRA is still open and active?

[Gary Lesser]

If the employers are controlled/related/affiliated then the existing plan should be adopted by participating employer. The eligibility requirements may need to be reduced (no service requirement).

If not (C/R/A) then a seperate SEP would work. If owner has a more than 50% interest in both entities, then 415 limits apply to both plans in the aggregate (even if not C/R/A).

Hope this helps.