Sep Retirement Plan – Benefits to Employees
As the owner of a small business , deciding on a Sep retirement plan can be an easy and smart way to offer retirement benefits for your employees. Eligible workers will be at least 21 years old and have worked for the company three of the past five years. The business owner is not required to contribute to the Sep every year. Contributions can be made at the percentage and frequency the business owner prefers , but must be uniform for all participating employees. The cap for contributions is the lesser of 25% of the employee’s annual compensation or $49,000 annually . A Sep retirement plan is normally not required to file annual reports with the government, making it simple for most small businesses to adopt. When the employees participate in a Sep retirement plan they must get certain key documents from the business owner and/or the financial institution serving as trustee for the accounts. These will include an overview of how the SEP operates, a statement on their account reporting fair market value of the investments, and information about the terms of the account explaining how changes are made to the plan and when employees are to receive information about contributions to their plan. When new employees become eligible to participate, they also must be given the written information. Participants cannot take loans from the Sep retirement plan, but are able to do a tax-free rollover into another traditional IRA, another SEP account, and even into another employer’s qualified retirement plan. Normal withdrawals from the Sep retirement plan can begin as soon as age 59 ½ years old. Taking distributions before that could result in an additional 10% penalty fine . Required distribution from the account must start by age 70 ½ years old. A Sep retirement plan offers a simple solution for many small companies looking to offer retirement benefits to their employees and enjoy those benefits themselves. It’s easy to administer, low-cost to operate, and beneficial to everyone
CHIRA – The New Charitable IRA – Part 2 of 2
Founder of the CHIRA plan, Doug Delaney, discusses the plan with WHHI (Hilton Head Island, SC) Talk of the Town host Ed McCullough. May 2010 See more at www.chirausa.com
Simple Rules for SEP IRA Eligibility
True to its name, the Simplified Employee Pension Plan – or SEP – is simple. It’s simple to establish and to administer, simple to establishSEP IRA eligibility for participants, and simple to manage and sustain.Usuallysmaller firms select a mutual fundcompany to hold the account. By doing so, theypermit the employees to figure out their own investment choices within the plan. The employer funds the contributions for the benefit of the qualified employees through a pre-tax wage reduction with very generous contribution limits. The employee may contribute up to 25% of yearly compensation, and have the money invested and growing in a tax-advantagedenvironment within the SEP account. The self-employedindividual does not receive wages, so their contribution limit is arrived at based on net profits from the business venture, allowing for 20% of annual net profit to be contributed to the account . All contributions need to be made by the final tax filing deadline, including extensions, and the account is completely vested once contributions have been made . This makes the account portable, and able to be rolled over into another type of individual retirement account, or in the case of a career change transferred to a retirement planbacked by the new employer. To qualify for SEP IRA eligibility, the employee must meet a few requirements: be at least 21 years old , have worked for the company for three of the last five years, have received a minimum of $550 in compensation. Again, basic and straightforward requirements are the hallmark of a SEP, including establishing the SEP IRA eligibility. The SEP is a choice for the smaller company that may not have the resources to provide employees a more conventional retirement program . The common-sense advantages for the employee aresolid, and the larger contribution limit will allow an opportunity for substantial retirement savings. The plan also provides the employer with an effective tax shelter.