SEP IRA contributions
Business started 1/1/14
So here are the people that have been there since near the beginning
1/1/14 Jason (owner-W2 wages)
4/1/14 Josh
6/1/14 Tracie (owner spouse but gets paid W2 wages)
7/1/14 Julie
Are all of these qualified for the three year because 2016 was their third year? Basically do they have to worked for 3 years by end of last year since thats what the contribution is for….
Or is it once each individual has hit their 3 years which would be at various dates in 2017?
(Also can’t the restrictions be less restrictive than the 3 of last 5 yrs)?
Permalink Submitted by Martin Helmer on Thu, 2017-04-06 03:24
assume year end of december 31 for both corp and the sep plan, with tax return on extension. You can amend the plan to now require only 2 years, effective 1/1/2016. If you use form 5305-sep as your “plan document,” just fill out a new one and give each employee a copy.a sep counts a year differently than a 401 plan or a simple-ira plan. If someone works on only one day during the year, that’s one year of service. So all 4 people have 3 years. The problem is that the rule says the service requirement must have been earned PRIOR to the given plan year. as it now stands, each of the employees had only 2 years of service in the 5 years prior to 2016.