Does the tax credit for start-ups apply?
No, because a plan must cover at least one non-highly compensated employee (NHCE) to be eligible for the credit.

What if the client currently has a SIMPLE IRA?
Benefit Plans Plus can create an amendment to terminate the plan (additional charge). Since a SIMPLE must be the exclusive plan for a calendar year the 401(k) cannot be established until the following calendar year. For example, if the SIMPLE is terminated as of 12/31/07 the 401(k) could not be effective until 1/1/08. The SIMPLE plan would still be funded for the 2007 plan year.

What if the client currently has a Profit Sharing or Money Purchase Plan?
Benefit Plans Plus can create an amendment to terminate the existing plan(s) (additional charge) if that’s determined to be the best option. The 401(k) can be adopted and funded right away as long as the prior plan wasn’t a 401(k). If both plans are in existence at the same time the annual additions limit applies to the combined contributions of both plans.

Can a Defined Benefit plan be combined with the SBO 401(k)?
Yes, it can. Benefit Plans Plus would want to look at the specific plan to see if this would be beneficial to the client.

What happens if a client hires employees who will be eligible to participate?
The employer would no longer be eligible for the SBO 401(k). Benefit Plans Plus can do a plan design for the client and create a new service agreement. The cost associated with the plan would increase due to additional testing and filing requirements.

Can a spouse of an owner participate in the plan?
Yes, as long as the spouse is receiving earned income from the company (W-2, Schedule C, K-1, etc.)

What if the client has ownership in another business?
Please contact Julie Martin at 314.983.1298 with the ownership information to determine if this client will be eligible for the SBO 401(k).

If you would like to receive more information, contact Julie Martin at 314.983.1298.

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