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My client was self-employed (unincorportated) and stated the business in 2006. He incorporated in 2010 and wants to set up a SEP. In determining how he needs to determine eligibility, can the service prior to 2010 count and therefore use 3 years on the 5305-SEP?

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Guest PatriciaT
Yes, he can. Entity type does not change the Employer sponsoring the plan. Therefore, the employer is the same, and he worked during at least 3 of the preceding 5 years.

Good Luck

In the first year that an employee is eligible for the SEP (say, turns 18 mid-year, but has been employed since the start of the year), MUST the plan count all of that calendar year's compensation when determining the employer contribution on behalf of that employee? CAN the employer only contribute based on the date of eligibility going forward for that first year? Thanks.

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Yes, he can. Entity type does not change the Employer sponsoring the plan. Therefore, the employer is the same, and he worked during at least 3 of the preceding 5 years.

Good Luck

In the first year that an employee is eligible for the SEP (say, turns 18 mid-year, but has been employed since the start of the year), MUST the plan count all of that calendar year's compensation when determining the employer contribution on behalf of that employee? CAN the employer only contribute based on the date of eligibility going forward for that first year? Thanks.

I've never seen an SEP that allowed for mid year entry; I'm not sure that the regs even allow it.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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I've never seen an SEP that allowed for mid year entry; I'm not sure that the regs even allow it.

I agree. I don't think the term "date of eligibility" has any meaning in the context of a SEP. You are either in for a given year, having worked for the sponsor for [up to] at least 3 of the previous 5 years, or not.

Ed Snyder

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