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March 7, 2009

SEP IRA Quick Reference Guide- 2009

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SEP IRA Quick Reference Guide- 2009

SEP IRA Features and Benefits

Eligible Employer

Age Requirement

Service  and compensation requirement

Salary deferral allowed

Maximum contributions allowed for employee

Any employer. Employers who use the services of leased employees or maintain any other retirement plan cannot use the form 5305-SEP, but may use a prototype or individually designed SEP

Can exclude employees under age 21

Must include employees who worked at least 3 of the 5 preceding years. 

A year of service is any work performed during the year, however short a period.

Can exclude employees who earn less than $550.

No

Lesser of 25% of employee’s compensation or $49,000 for 2009

Deductible contribution limit

Limitation on Compensation

Vesting of Contributions

Deadline to Establish Plan

Deadline for making contributions

25% of eligible compensation of all eligible employees

For 2009, the compensation cap is $245,000

100% immediate vesting

Employer’s tax filing deadline, including extensions

Employers tax filing deadline, including extensions

Nondiscrimination testing

5500 filing

Complexity

Administrative cost

Notable notes

N/A

N/A

Low

Low

Gives business that has not established a profit pattern or one that experiences fluctuation in profits, flexibility due to discretionary contribution feature

Ideally suited for …

Employers who are looking for a plan in which contributions are immediately 100% vested is easy/inexpensive to administer, has a discretionary feature for contributions. Also advantageous for employers who do not mind the fact that employees can take their contributions at anytime

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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