SEP IRA Quick Reference Guide- 2009
SEP IRA Features and Benefits
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.
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
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