Changing SEP eligibility requirement

[Guest rr2000]

Prospect firm is looking to reduce 09 tax liability and currently has a SEP. 2 of the 5 employees are under 3 year eligibility requirement from existing Form 5305. Is it possible to amend an existing Form 5305 to lower eligibility down to 1 year on existing SEP or just setup new SEP with only 1 year requirement to allow funding for all 5 employees?

[Gary Lesser]

There is no problem in amending the service requirement from 3 years to 1 year. The amendment should be effective on the first day of the plan year (1/1/09) and be executed by due date of business tax return. Employees must be notified of the amendment and its effect. A revised plan descriptiion should also be provided.