Simplified Employee Pensions (SEPs)

Simplified Employee Pensions (SEPs)

What is a Simplified Employee Pension (SEP)

Who can participate in a SEP?

SEPs compared with other plans

Salary Reduction SEP (SAR-SEP)

What is a Savings Incentive Match Plan for Employees (SIMPLE)

What is a Simplified Employee Pension (SEP)

Defined contribution plan for sole proprietors and small businessees

Employer contributes fixed percentage of your salary into account

Up to lessor of 15 percent of salary or $22,500

Every employee must receive same percentage

Employee sets up IRA

Employer deposits funds into IRA

All contributed funds become fully vested immediately

No IRS form 5500 to be filled out

Who can participate in a SEP

Sole proprietors (even if no employees)

Employees of small businesses

SEPs compared with other plans

Simpliest retirement plan to administer

Very little paper work

Employees gain immediate vesting

Must cover all full-time employees who have one year or more of experience

Salary Reduction SEP (SAR-SEP)

Savings program for SEP

Worker voluntarily saves into IRA account

Employer may provide a matching contribution

Worker may save up to lessor of $9,500 or 15 percent of salary

At least 50 percent of employees must participate

Savings Incentive Match Plan for Employees (SIMPLE)

Obviously a strained acronym

New retirement plan passed into law in 1996

Combines aspects of 401(k) and SEP

• For businesses with fewer than 100 employees
• Simpler than 401(k) to manage
• Designed to replace SAR-SEP

Companies must provide either

100 percent match up to 3 percent of worker's pay

Flat 2 percent contribution for all qualifying workers

Money withdrawn within two years is subject to 25 percent penalty tax