TERMINATING SEP AND STARTING A SIMPLE
Client set up a SEP for 2014 and he will make contributions for employees and owner up to the time of his tax return extension (Oct 15, 2015).
He would like to terminate the SEP in 2015 (even though he is making SEP contributions for 2014 in 2015) and start a Simple for the 2015 year. I know there are rules about not maintaining more than one plan. What is the definition of “maintaining”? Does this situation rise to the level of “maintaning more than one plan”? If so at what point can the client terminate the SEP and start a Simple.
Permalink Submitted by Alan - IRA critic on Thu, 2014-10-23 20:47
The effective date of the plans is the determining factor. The SIMPLE IRA should be set up now but effective 1/1/2015, and the SEP contribution for 2014 can still be made next year. He will not be maintaining the SEP in 2015 despite making the contributions then.