SEP PLAN ADOPTION – WAITING PERIOD
We are unable to locate the original SEP document that established the plan. Is three years the default waiting period or is immediate the default? Where is the answer…408(k) seems to indicate it’s three year unless the employer establishes otherwise. However, in reviewing the adoption form circa 2011 (Form 5305-SEP), it seems that an affirmative election would need to be in place. Also, I am certain that the taxpayer/client made a contribution in the first year….any technical help is appreciated.
Jim Magno
Permalink Submitted by Alan Spross on Sat, 2011-12-10 22:15
Jim,
No 3 year waiting period. Adoption requirements are included here:
http://www.retirementdictionary.com/articles/sepiraslowcostretirementpla…
Permalink Submitted by JAMES MAGNO on Mon, 2011-12-12 23:03
Alan-
SEP-IRA plan is not required to permit immediate participation. Must allow participation after three years. Check out Form 5305-SEP which has blanks to be filled in by plan sponsor when adopting SEP. I am not sure what you mean by “no 3 year waiting period”.
Thanks as always for your help.
All the best,
Jim M
Permalink Submitted by Alan Spross on Tue, 2011-12-13 02:17
I thought you were asking about establishing the plan itself.
With respect to covered employees, if a 5305 SEP was filed the custodian may have a copy, or any employee existing at the time should also have received a copy. If this still does not turn up a copy, it is also possible that the client fell under one of the exceptions that did not call for a 5305 to be completed (see earlier link), or the IRA custodian provided and retained the form.
However, if client is sure that a 5305 form was filed, there does not appear to be a particular default of the 3 employee options. Perhaps the client should simply file a new form for the current year using the option he wants considering what his employee situation is. I assume the largest exposure here is an employee who expects to have an account set up that did not happen.