Summary of SEP-IRA Plans
General Overview
A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small-business owners. When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA account; employer contributions are then made into each eligible employee’s SEP-IRA. Investments are managed by the each individual employee.
Eligibility
Any self-employed individual, business owner, or individual who earns any self-employed income
Key Advantages
Easy to set up and maintain
High contribution limit
Key Disadvantages
Don't know contribution limits until business profits are known
Business must contribute same percentage for all employees
Only applicable to self-employment income
Funding Responsibility
Employer contributions only
Annual Contribution Per Participant
Up to 15% of compensation, up to a maximum of $24,000
Access to Assets
Withdrawals at any time. Withdrawals are subject to current federal income taxes and a possible 10% penalty (if the participant is under age 59 1/2)
Vesting of Contributions
Immediate
Administrative Responsibilities
No employer tax filings
Administrative Costs and Fees
Generally low. However, can be complex to calculate correct limits for self-employed persons
All limits and features are for the 1999 plan year.
© Copyright 2000 Raymond S. Kulzick. All rights reserved. 000210.
This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.