I have long believed that a business can sponsor both a qualified plan and a SEP-IRA, as long as the SEP-IRA is an IRS approved prototype and NOT the IRS Model SEP (5305-A). Still have to comply with 415 and 404 aggregating the two arrangements, but OK to have both. Any other opinions? If you disagree, can you give me a cite? Thanks.

I agree that you can have a SEP and a Money Purchase Pension plan if you have a prototype SEP plan. However, if you maintain (or ever maintained) a defined benefit plan, you must get a letter ruling on the combination of the two - the question boils down to exactly how are you going to satisfy 415(e)?

I don't entirely agree. If a DB was maintained the letter ruling is optional and will only be issued if 415 issues are in fact involved. I don't think it is generally necessary to get a PLR if the actuary states in writing for administrative files that 415 cdn't be exceeded under current law limitations.

I have a small business in which I am the sole employee. What are the combined contribution limits if set up a SEP-IRA and a profit sharing plan? Can I set up a profit sharing plan?

thanks,
mazze

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email: steelgame@yahoo.com

The combined limits will be the same as if you just had one plan. Both are limited to the annual additions limitation of the lessor of 25% of compensation or $30,000. However, the SEP and PS plan will limit you to no more than 15% of your payroll. If you are self-employed, this is net after the contribution. If you made 184,000 gross, you could put $24,000 in the SEP or the PS plan, combining would not make a difference. If you adopt a Money Purchase Plan for yourself you could go up to 25%, but will still be limited by the 30k. If you are older, you may consdier a defined benefit plan for more enhanced contribution formuals that would allow you to potentially exceed the 30k limit in any defined contribution plan.