SEP IRA effective date
Hello,
what should be the effective date for a SEP IRA for someone who plans to fund for 2017 tax year?
Also, as to the 3 out of 5 year service rule, my understanding is if you are hired in Dec and still hired in Jan of the following year, it’s equivalent to 2 years of service for SEP purposes. so, does the 3 year rule look at the years of service as of the year that the plan is actually funded? or the tax year it’s established for?
Thank you again!
Permalink Submitted by William Tuttle on Fri, 2018-05-25 21:57
The effective date would usually be 1/1/17. Years of service eligibiity is based on the tax year, not when the contributions are actually deposited. The employee only has one (1) year of service eligibility for 2017 contributions. Assuminng that you timely filed an extension by 4/18/18 (extended by one day due to system issues), you have until 10/15/18 to adopt and contribute to a SEP IRA for the 2017 tax year.