Any business, whether a C Corporation, S Corporation, partnership, sole proprietorship, or self-employed can establish a Simplied Employee Pension (SEP) Plan.
The employer can restrict individuals under 21 years of age, and some part-time workers under a defined salary limit from being eligible for the SEP. Union workers who have a contract under collective bargaining and employers can structure the SEP to only allow eligibility to those who have worked 3 out of the last 5 years.
Contributions to each individual's retirement account must be allocated in a non-discriminatory manner.
Contributions to a SEP come directly from the employer, can vary from year to year, and can be discontinued as conditions warrant.
Contributions are made directly to each individual’s SEP IRA account.
SEP may be established and contribution can be made for the prior calendar year up to the employer's due date for tax filing, including extensions.
If contribution is discontinued for any reason, it must be discontinued for all employees.
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Each individual employee can have up to 25% of their pre-tax income contributed to the SEP up to a maximum of $42,000 per year (this is adjusted annually for inflation).
Employees are immediately 100% vested with their tax deferred allocation. When, as and if they leave the employer they can roll their account in their own individual personal IRA account or other retirement plans. (Withdrawal before age 59 1/2 may be subject to 10% penalty.)
Employers are not required and are not obligated to make any contribution to their employees retirement accounts; however, if the employer voluntarily and at their sole discretion elects to contribute for any one employee then they must put in the same percent of income for all eligible employees.
Loans are not permitted in a SEP.
SEP IRA plans may be discontinued and another type plan substituted.
This type of retirement plan is the simplest type available for businesses and requires minimal reporting and disclosure.
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IRS approved prototype plans are available and require no government reporting.
SEP IRA plans can readily be moved from one mutual fund custodian, and or variable annuity custodian to another and visa versa. Deferred sales charges may or may not apply.
Depending on tax bracket it's possible to have a tax deductible IRA, a non tax deductible ROTH IRA and a tax deductible SEP IRA.
Numerous mutual fund and variable annuity investment choices are available for SEP plans.
All Mutual Funds, Variable Annuities and Variable Life Insurance policies are offered by prospectus ONLY. For complete information including charges and expenses obtain a prospectus, and read it carefully before you invest.
Mutual Fund, Variable Annuity and Variable Life prospectuses are available directly from the issuing companies when product information is requested, and in some cases, they can be downloaded directly on the issuing company's internet website.
The tax deferral characteristic associated with variable annuities is not needed when used in an account that is by definition tax deferred (retirement accounts) and according to some sources variable annuities generally have higher fees and internal expenses than mutual funds.
Systematic and dollar cost averaging within Mutual Funds, Variable Annuities and Variable Life insurance policies does not assure a profit and does not protect against loss in declining markets. It involves continuous investment in securities regardless of fluctuating prices and the investor should consider his or her financial ability to continue purchases through periods of low price levels.
Investing in stocks, bonds, mutual funds and variable annuities does not guarantee a profit.
All of these investments can lose money.
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Stocks, bonds, mutual funds and variable annuities are not FDIC insured.
