Setting up a SEP Plan

Sorry, SEP is not something we normally work with but someone is asking me so I'm trying to help them out.

They are just setting up a SEP Plan for a group, 5 employees during the year:

1. Can you have a last day requirement to get a contribution?
2. Can you have an eligibility period?  If so, can it be setup similarly to a 401(k) Plan?  Are there specific rules?

Thanks in advance!

No, SEPs are for everyone who was eligible.  No last day (or 1000 hours) allowed.

Usually the SEP may require 3 of the 5 prior years having above the IRS annual stated earnings (not hours) threshold, but that's how you can exclude newer or very part-time folks.  And sometimes that costs the HCE itself being eligible.  The SEP paperwork should let you liberalize the eligibility to be even easier (fewer past years required) but the idea is that they're simplified, everyone who met eligibility shares, and with a uniform rate (not going to go into an integrated SEP here).

I would also say to do a little forward looking here as well, or ask your question poser to do so. Is there an owner with substantial income being covered and might such owner be interested in a cash balance plan. Also, is the owner substantially older than the employees? Remember, everyone gets same percentage in SEP. A cross-tested safe harbor 401(k) profit sharing plan could provide an owner with the same or more contributions at a lower employee cost, more than offsetting the added admin cost. And if a CB is in the future, such does not pair with a SEP.

Fully vested employer contributions  SEPs in my view would normally only be good for very small companies. You can do an integrated formula. I also don't necessarily understand why an employer wouldn't want to encourage employees to save part of their salaries. SEPs to me would be a niche thing for the right employer.