I could have sworn that I had read that an employer could not have a SARSEP and a qualified plan in the same year. I have a client that wants to adopt a 401k mid year but something tells me this can't be done. I have no basis for this conclusion except to say I though I read something. Can anybody confirm or deny this?:confused:

If a prototype SARSEP (which allows for adoption with a QP) is combined with a P/S plan the elective and deduction limits are shared. Specifically, the PS contribution limit under 404 is reduced by the deductible amount contributed to the SEP/SARSEP. See IRC Sec 404(h)(2) and (h)(3).