SEP IRA – Acquisition, Common Control, Eligibility
A business owner has one employee and both participate in a SEP. The eligibility requirements require 2 years of service.
In July, this employer will be acquiring a new business with 13 employees. Therefore, he will have “Existing Co” with himself and his existing employee, and “New Co” with 13 employees.
I assume he can run the SEP IRA for just himself and his existing employee through the end of this year and exclude the 13 new employees of NewCo because they don’t meet the years of service requirement…correct?
Permalink Submitted by Denise Appleby on Thu, 2012-05-24 22:14
[quote=”[email protected]“]A business owner has one employee and both participate in a SEP. The eligibility requirements require 2 years of service.
In July, this employer will be acquiring a new business with 13 employees. Therefore, he will have “Existing Co” with himself and his existing employee, and “New Co” with 13 employees.
I assume he can run the SEP IRA for just himself and his existing employee through the end of this year and exclude the 13 new employees of NewCo because they don’t meet the years of service requirement…correct?[/quote]
Start with the purchase agreement – it might have your answer. Check the SEP Plan agreement as well, to see what it says about predecessor employers ( if the company is a predecessor employer) —if it is, see [i]IRC § 414 (a) Service for predecessor employer.[/i]
An ERISA attorney might be able to say for sure after reviewing all related documentation