Can simple IRA’s and SEP IRA’s coexist
I am working with a gentleman who owns a construction company and is set up as a sole proprietor. He realizes the risk of this business structure but that is another point. He has about eight employees and wants to offer them access to a simple IRA. He also earns several hundreds of thousands of dollars each year from some rental property that he alone owns and manages. Is it possible for him to offer the simple IRA plan to his employees and participate in a SEP IRA plan himself? Keep in mind that his construction employees have nothing to do with his real estate business. They are completely separate businesses except for the fact that they are both structured as sole proprietorships. In other words, he would wrap the simple IRA plan around his construction business but not participate. He alone would participate in the SEP IRA. I have contacted the IRS and they say he can but I honestly don’t trust their call center.
Permalink Submitted by mk foss on Wed, 2010-05-19 23:43
Managing rental property is typically not a business that can adopt a retirement plan. He would need self-employment income in order to do that – and rental income doesn’t qualify. If the rental property was in a corporation for example and paid him a management fee – the fee would be SE income or a salary from the corporation would be SE income. A corportion is genarally NOT a good vehicle for owning rental property in any case.
Since he owns 100% of each business – even if he could have two plans, his contributions to one would be affected by the other.
However, this forum is for taking money out of plans, instead of putting it in. So you may want to consult another source with expertise in creating retirement plans.
Permalink Submitted by Peter N Zwart on Mon, 2017-09-04 17:07
I have a IRA , but last fiscl year I had income on a 1099 so my financial adviser recommended metp open a Sep Ira, because he said my contribution to my regular IRA, the max amount, was not allowed? anymore and /or was not detuctable anymore. Is this correct?
Permalink Submitted by Alan - IRA critic on Mon, 2017-09-04 18:24
Do you have another job as an employee for which you are making contributions? If so, your income may be too high to deduct a TIRA contribution or to make a Roth contribution. You could open a SEP for self employment income but your max contribution could be more or less than 5500 depending on the amount of 1099 income you have. A SEP contribution is limited to 20% of your net earnings from SE less 1/2 of your SE tax. I assume you do NOT participate in a SIMPLE IRA account.