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How to create SEP for partnership excluding leased employees?

Guest april90

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Guest april90

Here's a complicated matter, I'm going to explain as best as I can. Feel free to contact me if you guys need further clarification:

There is a Professional Corporation(PC) with 8 (equal) partners with less than 50 employees. Employees are provided with standards 401k and other benefits as well. These employees receive paychecks from PC, the main entity.

These 8 partners also own a surgical center(SC). SC leases employees from PC with certain term agreements. Any profit made from SC is split between partners based on percentage of ownership. Aside from leased employees, the SC has no other employees.

Is it possible to create SEP IRA exclusively for 8 partners? Does it have to be offered to leased employees?

Any help would be appreciated. Feel free to contact me :)

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  • 2 months later...

Maybe. From SEP LRM---

1. Statement of Requirement: Participation Requirements, Code §§ 408(k)(2) and 408(k)(7).

Sample Plan Language:

The SEP shall cover each employee (including all employees of controlled groups as described in Code § 414(b), groups under common control as described in Code § 414©, and affiliated service groups as described in Code § 414(m), and all leased employees who are not employees of the employer but are required to be treated as employees of the employer under Code § 414(n), and all employees required to be aggregated under Code § 414(o)).

To exclude leased employees, the employer would generally have to make a 10% contribution into a money purchase pension plan for all leased employees. The cotributions ahve to be fully vested and none of the leased employees may be excluded from the plan. There are other exceptions/imitations -- see IRC 414(n).

Employer would need a prototype plan that provides for such an exclusion or an individually designed SEP.

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