SEP-IRA Eligibility

I would appreciate confirmation regading the following SEP scenario

FACTS:
New buiness (owner only), began operation on 10/17/2011
1st employee hired 5/23/2012
Owner would like to exclude the employee for 2013 and 2014 allocation.

Questions (confirmation needed)

Using 5305-SEP the owner would effectively exclude the employee for a 2013 allocation by selecting 2 out of 5 years of service required. Correct?
in 2014 using 5305-SEP the owner wants to change the eligibility to 3 out 5 years effectively excluding the employee again for 2014 allocation. Can this be done? Is there anything that I am overlooking?

thank you



I am reposting as I am hoping someone can provide me guidance. Thank you



Yes, he could do that, but why not just elect the 3 out of 5 option to begin with? He can change it to 2 out of 5 if he later wants to include the employee for 2014. Employer does not have to provide a copy of the 5305 to the employee until the employee becomes eligible.  http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Participation



Shuts out the owner as well as the employee.



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