Contribution limit? SEP rolled to solo K in 07? | Ed Slott and Company, LLC

Contribution limit? SEP rolled to solo K in 07?

Afternoon: Below please find the scenario, any thoughts that you would share would highly appreciated. Scenario: One has made contribution to one’s SEP in 07. During 07, one direct rolled over SEP to solo 401k since one realized that higher contribution will be needed. Questions: 1. The contribution made to SEP in 07 will be reported to IRS as SEP contribution? 2. If one makes additional contribution to Solo 401k for 07, will this be reported to IRS as well? 3. If the answers are yes to both questions above, then what's the contribution limit? Go with the solo 401k limit? And the SEP contribution will be counted as part of the Solo 401k's contribution? Thank you kindly in advance. The same questions are being inquired to other CPAs and Retirement Specialists. I'll advise the responses upon receipt of the replies.

The direct rollover of the SEP to the solo K has no bearing on the amount of deferrals you can make to the solo K. The answer to both questions is "Yes", and the rollover will be reported also on a 1099R. The solo K regular contribution limit is the same as if you never rolled the SEP into the plan.

Thanks for the response. Since the rollover has taken place, I think the contribution should be counted as part of solo k's. Otherwise, one can double dip by contributing to SEP, roll it over and contribute to solo k to get more tax deduction. Doe it make sense? Happy holidays!

ahs, as Alan said “The direct rollover of the SEP to the [url=http://www.retirementdictionary.com/SBO-401k.htm]solo K[/url] has no bearing on the amount of deferrals you can make to the solo K”. Here’s one way to look at it:  Your salary deferral contribution can be 100% of your compensation, up to $15,500 ( + [url=http://www.retirementdictionary.com/Catch-up-Contribution.htm]catch-up[/... if eligible).  Your ‘employer’ contribution is the lesser of 25% of your compensation or $45,000. However, your [url=http://www.retirementdictionary.com/annual-addition-limit.htm]aggregate contribution[/url] cannot exceed $45,000 (+ catch-up if eligible). It does not matter the number of plans you split your contributions between ( or among). Making contributions to only a Solo-k, or to a Solo-K and a SEP IRA does not change your aggregate contribution limit. Another way to look at it is… the contributions to the SEP, has the same effect as making employer contributions to the Solo-k. In other words, the (lesser of 25% of compensation or $45,000) can either me made to the SEP or the Solo-k, or split between both. There is no opportunity for double dipping. PS. If the business is unincorporated, the percentage limit is 20% of the modified net profit.
 

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