What is an example of the 3-of-5 rule?
Assume an employer has a SARSEP with a requirement that an employee must work for it in at least 3 of the last 5 years (the maximum requirement) to receive an allocation under the plan. To be eligible for the 2008 year, for example, an employee must have worked for the employer for some time (no matter how little) in any 3 years in the 5-year period 2003 to 2007. Thus, an employee that worked for the employer in 2003, 2006 and 2007, must share in the SARSEP contribution made for 2008.
Assume an employer has a SEP with a requirement that an employee must work for it in at least 3 of the last 5 years (the maximum requirement) to receive an allocation under the plan. To be eligible for the 2008 year, for example, an employee must have worked for the employer for some time (no matter how little) in any 3 years in the 5-year period 2003 to 2007. Thus, an employee that worked for the employer in 2003, 2006 and 2007, must share in the SEP contribution made for 2008.
Assume you have a SEP with a requirement that an employee must work for you in at least 3 of the last 5 years (the maximum requirement) to receive an allocation under the plan. To be eligible for the 2005 year, for example, an employee must have worked for you for some time (no matter how little) in any 3 years in the 5-year period 2000 to 2004. Thus an employee that worked for you in 2000, 2003 and 2004, must share in the SEP contribution made for 2005.
