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.
Salary deferral allowed for SARSEPs established before Janaury 1, 1997)
Lesser of 25% of employee’s compensation or $49,000 for 2011
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 2011, 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. With 100% immediate vesting, employees can take their contributions at anytime.
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.