INDIV 401K
Hello to All,
Two quick questions re: Individual 401k.
1 – I understand you can’t have W-2 employees who work over 1,000 hrs per year. Is that cumulative for all employees or is it per employee?
2 – If someone has two businesses, one with employees and one without, can they set up the Indiv 401k for the “without employees” business and use their SEP for the “with employees”, of course subject to aggregate contribution limitations?
Thanks in Advance
Permalink Submitted by Denise Appleby on Sat, 2012-02-18 19:37
[quote=”djmoulton”]Hello to All,
Two quick questions re: Individual 401k.
1 – I understand you can’t have W-2 employees who work over 1,000 hrs per year. Is that cumulative for all employees or is it per employee?
2 – If someone has two businesses, one with employees and one without, can they set up the Indiv 401k for the “without employees” business and use their SEP for the “with employees”, of course subject to aggregate contribution limitations?
Thanks in Advance[/quote]
1. There are some exceptions. The employer can still maintain the plan if the employee does not meet the other requirements, even if the employee works for more than 1,000 hours. Also, this does not apply to owners of the business
2. Not if they own 100% of both businesses. If they own less than 100% of either business, it may be possible, but further test would be required to determine controlled group or affiliated service group status. If the businesses are part of a controlled group or affiliated service group, then it is not allowed.
controlled group defined http://www.retirementdictionary.com/definitions/controlledgroup
affiliated service group defined http://www.retirementdictionary.com/definitions/affiliatedservicegroupasg