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Employee Benefits » Products » Simplified Employee Pension (SEP)
Simplified Employee Pension
Self-employed individuals or new businesses with variable profits should consider opening a Simplified Employee Pension (SEP) plan for the business owner and its employees. A SEP is inexpensive to establish and maintain, and since employer contributions are not mandatory, retirement contributions can vary each year.
Advantages:
- Offers the simplicity of an IRA with much higher contribution limits
- Reduces the administrative burden, with few paperwork requirements and no start-up or administrative expenses
- Provides valuable tax advantages for the business owner and the employees
Features:
Plan description
A SEP plan is a cost-effective, tax-favored retirement program for self-employed individuals and small business owners. It allows employers to make contributions to traditional individual retirement accounts (SEP/IRAs) maintained by employees.
Plan type
IRA-based.
Participant eligibility
Employees age 21 and older who have earned at least $450 (indexed for inflation by the IRS) during the year and who have performed services for you in at least three of the past five years. (Less restrictive eligibility requirements can be established.)
Employer contribution
Employer contributions are discretionary - in both amount and frequency. For 2005, the lesser of 25% of compensation (up to $210,000) or $42,000 can be contributed for the owner and each eligible employee.
Employee contribution
Employee contributions are not permitted in SEPs.
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