SEP IRA Quick Reference Guide- 2011
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 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 |
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. With 100% immediate vesting, employees can take their contributions at anytime. | ||||
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