Is there any reason why you could not use a non-whole number (ie. 1.5 years) as the eligibility requirement for the SEP?

The company is two years old and some of the non-key employees do not have 1.5 full yrs of service, and the employer would like to exclude them in this first year.

Thanks,

The phrase "has performed service for the employer during at least of the 3 immediately preceeding 5 years" (i.e., either plan or calendar years) found in Code Section 408(k)(2)(B) would seem to preclude the use of a fractional part of a year. The rules were intended to be simplified; service perforned at any time within the year would count as service for that "year." Thus, a plan that contained a "1.5" years of service requirement would be operated in the same manner as if it said "2" years.