SEP IRA Set up timing

Submitted by Keith Kim on Mon, 2018-07-23 17:06

Hello,
I have a business owner client who has a 2 entities.
He recently transferred all of his employees from Entity 1 to Entity 2 with a hire date of 01/01/18.
That results in the situation that he is the only employee of Entity 1 going forward.
1. Can he set up a SEP for Entity 1 for 2018 deductible contribution only for himself?

2. For controlled group purposes, will the situation be different if the Entity 1 is owned by the client and Entity 2 is 100% owned by his wife compared to him owning both entities 100%?

Thank you!



Submitted by William Tuttle on Mon, 2018-07-23 21:58

  1. No, controlled group.
  2. No, attribution.
  • Employer retirement plans represent public policy to provide tax benefits for the benefit of employees. The rules are designed to prevent exactly the type of discrimination attempted here. There are other employer retirement plan types available such as a SIMPLE IRA.
  • If the employer doesn’t want contibute to employees, he can still make traditional or Roth IRA contributions. There is nothing preventing him from making taxable investments not subsidized by tax policy.

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