SEP IRA Plan conversion to 401k
Considerations for SEP conversion to 401k plan in 2024. No contributions have been made in 2024 for the 2023 plan. Client wants to terminate SEP and start a 401k.
Can they contribute to the SEP for a 2023 contribution AND start the 401k plan effective 2/1/2024 or later? Employer is an S-Corp with six employees. Client wants ability to make deferral contributions compared to SEP plan. SEP plan was started in 2021.
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2024-01-04 22:25
A 5305 SEP cannot be maintained for the same year as a 401k. However, the 401k is being adopted in 2024 while the SEP IRA is only treated as “maintained” in the year for which contributions are made. 2023 SEP contributions can therefore be made in 2024, but no SEP contributions for 2024.