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Simplified Employee Pension SEP IRA
A simplified employee pension plan or account that is designed for a small business. A SEP IRA is when the employer of a company opens an IRA for each employee and makes contributions into the account.
The contribution limits are higher than a regular IRA.
A SEP requires less management and administration than a typical corporate retirement plan, like a 401-k or defined benefit account.
SEPs provide a much simpler alternative to other qualified employer retirement plans and are generally far less costly to install.
Employer contributions, which are discretionary, are tax-deductible to the employer and not included in the employees’ income.
Required minimum distributions of Simplified Employee Plan account balances must begin by age 70½.
Funds in a SEP may be rolled over according to the rules governing rollovers of traditional IRAs.
Distributions
Like traditional IRAs, required distributions from a Simplified Employee Pension plan must begin no later than the employee’s age 70½, even if the individual is continuing employment. The first distribution can be delayed until April 1 of the year following the year in which the employee turns age 70½. Again, the individual should know that by waiting until this required beginning date to take the initial minimum required distribution, he or she must also take a second distribution by December 31 of that same year, resulting in two taxable distributions occurring in the same year, with consequently greater tax liability.
Questions? Let Us Help:
Company Help
If you are a company in need of servicing, regulations or suitability to your employees and company or have questions on plan fees, compliance or other areas of concern, please use our Company Retirement Plan Help Form for business owners, HR managers or other plan administrator.
Individual IRA - SEP questions
If you are an individual with a retirement account and need assistance with a distribution, contribution question or other transfer rollover questions, American Investment Training can help. You can submit your question to our Retirement Plan Help form for individuals.
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