A SEP is a cost effective means for an employer to provide a heavily funded retirement plan for himself and for his valued employees. It is characterized by an extremely desirable contribution “limit”. An employer can contribute the lesser of 25% of compensation or $45,000.00 to an IRA established for each qualified employee. These contributions are tax-deductible the employer.
Contributions are due by the employer’s tax filing deadline, including any proper extensions. The contributions are simply announced to the employees as to when they are made and as to the amount. The employer can change or discontinue contributions each year and can also time them in a manner beneficial to him.
Plan participants are 100% vested for all contributions. Employees covered under a SEP IRA cannot make salary deferrals to a SEP IRA. The Plan is abundantly easy and inexpensive to establish and to administer.
What is the ideal business profile for a SEP IRA?
SEP IRAs are 100% employer funded and, with only a relatively small amount of leeway, require that the employer contribute equal percentages to all of the company’s income earners, “owners” as well as non-owners. Certainly, individually, partner or family owned and operated businesses would favor SEPs, as would small businesses with highly valued employees and, concomitantly, low employee turnover. The employer must be willing to reward his entire staff of employees to the point of contributing a nearly identical percentage of those employees’ salaries as the percentage of his salary that he sets aside for himself.
What do I need to set up a SEP?
Annuities such as those offered by Providence are the classic vehicles for funding SEPs. Accordingly, Providence can make all of the appropriate arrangements for you. These include adoption of a SEP agreement, outlining the provisions of the Plan and notice to the employees, which notice can be accomplished simply by giving each employee a copy of the adoption agreement.
Do I need tax and plan administration advice?
Any prudent businessman will seek appropriate tax advice from a tax professional such as a CPA, before adopting a SEP. In fact, such a professional can administer the plan for you in terms of contribution guidance. Your financial institution, Providence, can take care of the rest.
TURN TO PROVIDENCE THE MINUTE YOUR CPA OR OTHER TAX PROFESSIONAL RECOMMENDS THAT YOU ADOPT AND CONTRIBUTE INTO A SEP.