Non-5305 SEP with Individual 401(k)

[matthny]

Hello,

I've a situation where someone created their S -Corp late in the year, so they received about $70K which will be reported on a 1099 for their SSN, and $50K since moving to the EIN.

I understand that 5305 SEPs don't integrate with the individual 401(k) but was wondering if there was any relatively straightforward way to create a SEP for the $70K that would be compliant?

It would be a one time event, as going forward the 401(k) would be maxed out.

Are there any firms that offer a prototype plan or quick to customize solution to create the SEP with relative speed and ease?

Best,

Matt

[Lou S.]

Why not have the sole prop also adopt the S-corp plan and make a profit sharing contribution on the combined income from both entities? I'm assuming he has a 100% ownership of the S-corp but maybe that's a bad assumption on my part.

[matthny]

Why not have the sole prop also adopt the S-corp plan and make a profit sharing contribution on the combined income from both entities? I'm assuming he has a 100% ownership of the S-corp but maybe that's a bad assumption on my part.

Yes, he is the 100% owner. The Individual 401k is simply the Vanguard prototype. I didn't even think he could adopt the same plan... will get on the phone with them to find out more, thanks!

[Lou S.]

Yeah it is a clear controlled group, no reason to make it complicated when one plan should work just fine. He'll just have zero income from the sole proprietorship in future years it will all be from the s-corp presumably.