SEP Eligibility
When (timing) can a business owner change the eligibility requirements assuming the plan was established using 5305-SEP?
The owner has a number of employees that will become eligible based on the current eligibility requirements – he wants to amend the requirements making eligibility more restrictive. In essence he wants to keep the employees satisfying eligibility for as long as possible.
Thank you
Permalink Submitted by Alan - IRA critic on Thu, 2015-03-26 18:15
Yes, but the Regs do not specify a deadline. Since eligibility is based on calendar years in which an employee works, it makes sense to only change the eligibility effective 1/1 and provide copies of the revised 5305 SEP by 11/2 of the prior year. That’s the same amendment notification period that applies to SIMPLE IRAs. However, note that the owner must also meet the new eligibility requirements just like the employees, so should not keep that in mind when the eligibility period is restricted.