SEP and 401K

Submitted by John Going on Tue, 2020-04-21 21:51

My client contributed $31K to her 401K offered through her partnership. She also has a SEP IRA from the same partnership from before they moved to a 401K. My questions:

1 – Can she contribute additional funds to her SEP account up to the combined 2019 deferred contribution limit under Section 415(c)(1)(A) – $56,000. Since she has already contributed $31K to her 401K, can she contribute an additional $25K to her SEP?

2 – With a SEP, there is no employee deferral, only employer contributions. Thus, the per person rule does not apply, right?

Thanks in advance for your help –

John

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Permalink Submitted by William Tuttle on Wed, 2020-04-22 01:25

The partnership is considered to be the employer of each of the partners. Thus, an individual partner is not an employer who may establish a qualified plan with respect to his services to the partnership. Only the partnership can make employer contributions.
If there are non-HCE employees this would violate anti-discrimation laws, rules and regulations.
Not to mention, if this is a 5305-SEP IRA this would be serious plan error.

Irrelevant, see above.