SEP IRA Quick Reference Guide- 2011
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SEP IRA Features and Benefits
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Eligible Employer
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Age Requirement
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Service and compensation requirement
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Salary deferral allowed
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Maximum contributions allowed for employee
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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
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Can exclude employees under age 21
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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.
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No
Salary deferral allowed for SARSEPs established before Janaury 1, 1997)
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Lesser of 25% of employee’s compensation or $49,000 for 2011
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Deductible contribution limit
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Limitation on Compensation
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Vesting of Contributions
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Deadline to Establish Plan
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Deadline for making contributions
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25% of eligible compensation of all eligible employees
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For 2011, the compensation cap is $245,000
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100% immediate vesting
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Employer’s tax filing deadline, including extensions
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Employers tax filing deadline, including extensions
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Nondiscrimination testing
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5500 filing
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Complexity
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Administrative cost
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Notable notes
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N/A
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N/A
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Low
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Low
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Gives business that has not established a profit pattern or one that experiences fluctuation in profits, flexibility due to discretionary contribution feature
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Ideally suited for …
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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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