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It is a bit tough finding this info online, I am going to ask my CPA but I wanted to get some background info from the web first.

I currently have a SEP set up for myself but am looking into setting up a 401k for all my employees. What are my options after I set up the 401k?
A bit about the company set up:

  • The business has been around for < 2 years
  • I do not pay myself a wage from the business (company a) instead, the distributions are fed into another llc reporting as an s-corp (company b) that I have created. I take a wage from company b.
  • My current SEP is also from company b.

Can I set up a solo 401k from company b and run the other 401k for all the company a employees? Any other options?

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  • You may be violating SEP rules if you haven't been making SEP contributions for your employees. You have to consider "related employers". See irahelp.com/forum-post/… – gaefan Apr 12 '17 at 11:02
  • That is not an issue @JeffO'Neill as all the employees work for Company A and OP is the only employee of Company B which has the SEP. – Pete B. Apr 12 '17 at 11:52
  • The IRS suggests otherwise: irs.gov/retirement-plans/… – gaefan Apr 12 '17 at 13:40
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If you were looking to maximize your ability to save in a qualified plan, why not setup a 401K plan in Company A and keep the SEP in B?

Setup the 401K in A such that any employee can contribute 100% of their salary. Then take a salary for around 19K/year (assuming under age 50), so you can contribute and have enough to cover SS taxes.

Then continue to move dividends to Company A, and continue the SEP in B. This way if you are below age 50, you can contribute 54K (SEP limit) + 18K (IRA limit) + 5500 (ROTH income dependent) to a qualified plan.

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    I think you have your Company A/B backwards. It sounds like the OP is looking to set up 401k's for the Company A employees. But otherwise a good answer. – Ogre Psalm33 Apr 12 '17 at 12:31

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