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
Permalink Submitted by ShipsnGiggles on Mon, 2013-12-16 14:17
I am reposting as I am hoping someone can provide me guidance. Thank you
Permalink Submitted by Alan - IRA critic on Mon, 2013-12-16 16:48
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
Permalink Submitted by Martin Helmer on Mon, 2013-12-16 21:20
Shuts out the owner as well as the employee.