Amending a 401(k) plan to a SEP???

[Guest VAP]

We have a 401(k) plan that would like to amend to a SEP plan. Is this possible, or would the 401(k) plan have to terminate and then start a new SEP. It is my understanding that SEPs are not considered a sucessor plan so that shouldn't be an issue. Any cites would be appreciated. Thank you.

[Bill Berke]

I strongly believe you cannot amend a 401k into a SEP. One is a qualified plan (401k), the other is a series of IRAs under IRC 408 (not qualified). I think you must formally terminate 401k plan first. And you have to coordinate deducton/contribution timing rules and limitations when you switch plans and deal with the accounts of a termnated 401k plan where the employees are still working for the same employer.

[Guest boberlander]

On a somewhat related issue:

If you terminate a SEP or SARSEP and start up a 401(k), is the 401(k) plan not a successor plan?

Do years of service under the SEP plan have to count under the 401(k) plan? (My understanding is that if the 401(k) is not a successor plan, then YOS do not need to count).

Thanks.

[Guest Don J. Smith]

It depends what you want to do. You can have language in the 401(k) plan document that says, "do not count prior years of service".