I need help quick! I have a meeting with a potential client who is considering starting a 401(k) plan strictly for the "professionals". There are two companies (a controlled group) where they currently have a SEP that covers their union (non-professionals) as well as the non-union (professionals). They also have an old Keogh. I know there has been much debate over whether they can contribute to the SEP and the 401(k) during the same year.

My question is, unless there is a distributable event, they cannot roll the assets for the "professionals" from the SEP to the 401(k) plan, correct?

Also, let's say that the SEP is not a model SEP, is there a conflict due to the fact that the professionals (non-union) are getting it from both sides and the union ee's are not?

My suggestion would be to terminate the Keogh, and roll those assets to the 401(k), but how do we handle the SEP situation?

I realize this is probably not an option, but let's say they could terminate the SEP, I would assume those assets could be rolled into the 401(k) providing we set the plan up to accept IRAs, correct?

Thank you so much for all your help!

The SEP plan is a year to year plan that may be terminated at any time. The employer contributions are funded through a traditional IRA and they are the participants's funds to do with as they please. The employer has no control over the funds once they are contributed to the participants IRA plan . If a participant chopses, they may roll their SEP $ to the 401(k) providing the 401(k) will accept the rollover. It is an individual choice.