Simplified Employee Pension Plan (SEP)

SEPs are ideal for self-employed people and small-business owners who wish to make tax-deductible contributions of up to 25% of their income, while maintaining complete contribution flexibility each year. In general, your client must contribute the same percentage of pay for himself and any eligible employees through their IRAs. SEPs are the easiest retirement plans to administer and are a good choice for firms with few or no employees, including individuals who do either full-time or part-time freelance work.

 
 

Who May Establish

Sole proprietors, partnerships, corporations, nonprofit, and government entities. 

 

Establishment Deadline

Tax filing date, including extensions.

 

Contribution Deadline

Tax filing date, including extensions.

 

Who Contributes

Employer.

 

Annual Contribution Limit1

25% of pay (20% for unincorporated business owners) with no more than $275,000 of compensation being taken into account, up to $55,000.

 

Contribution Requirements

Contributions are discretionary each year.

 

Employee Eligibility

All employees age 21 or older who have worked three out of the last five years and have earned at least $600 in 2018.²

 

Vesting

Always 100%.

 

Withdrawals

Allowed anytime, subject to income tax. A 10% penalty may apply before age 59½.

 

Loan Feature

Not available.

 

Plan Administration

None.

 

Visit the Forms and Applications page for more information on what you need to open or modify a SEP IRA account.

1 For 2017, no more than $270,000 of compensation may be taken into account, with a total plan contribution not to exceed $54,000.

2 $600 in 2017.

This material is not intended to replace the advice of a qualified attorney, tax advisor, or insurance agent. Before your client makes any financial commitment regarding the issues discussed here, make sure he or she consults with the appropriate professional advisor.

SIMPLE IRA

Important Changes to the Management of Your Amundi Pioneer SIMPLE IRA: Download Your New SIMPLE IRA Disclosure Statement & Custodial Agreement

 
Firms with 100 or fewer employees can establish a SIMPLE IRA – an employee savings program that in some ways resembles a 401(k). Employees can make pretax contributions through payroll deduction. Employers pay no administration costs and direct all contributions to individual SIMPLE IRAs. Since employer contributions are required each year, this plan makes sense for businesses with predictable income.

Who May Establish

Employers with 100 or fewer employees, including sole proprietors, partnerships, corporations, government and nonprofit and entities. Must be employer's only plan.

 

Establishment Deadline

January 1 through October 1.¹

 

Contribution Deadline

Employee contributions withheld each pay period. Employer contributions by tax filing date including extensions.

 

Who Contributes

Employer and employees.

 

Annual Contribution Limit2

Employees can defer up to $12,500 ($15,500 if age 50 or older) in 2018 with no percentage of pay limit. Employer makes additional required contributions.

 

Contribution Requirements

Employer must make required 3% match or 2% of pay contribution for eligible employees each year.3

 

Employee Eligibility

All employees earning $5,000 or more in any two prior years and expected to earn $5,000 in current year.

 

Vesting

Always 100% for both employer and employee contributions.

Withdrawals

Allowed anytime, subject to income tax. A 10% penalty (25% during first two years of participation) may apply before age 59½.

 

Loan Feature

Not available.

 

Plan Administration

None

Visit the Forms and Applications  page for more information on what you need to open or modify a SIMPLE IRA account.

 

Employee notice must be given before plan establishment date.

2 For 2017, up to $12,500 ($15,500 if age 50 or older).

3 Employer may reduce match below 3% (but not below 1%) in two of every five years.

This material is not intended to replace the advice of a qualified attorney, tax advisor, or insurance agent. Before your client makes any financial commitment regarding the issues discussed here, make sure he or she consults with the appropriate professional advisor.

Age-Based Profit Sharing

Age-based plans especially appeal to business owners who are older and more highly paid than most of their employees. Like traditional profit sharing plans, employer contributions are flexible, but age-based plans allocate contributions under a formula based on both age and salary, giving older participants a higher percentage of salary than younger ones.

Who May Establish

Sole proprietors, partnerships, corporations, government and nonprofit entities. 

 

Establishment Deadline

Tax year-end.

 

Contribution Deadline

Tax filing date, including extensions.

 

Who Contributes

Employer.

 

Annual Contribution Limit

25% of total eligible payroll (20% for unincorporated business owners), with no more than $275,000 of compensation being taken into account, with individual allocations limited to 100% of pay up to $55,000.

 

Contribution Requirements

Contributions are discretionary each year.

 

Employee Eligibility

All employees age 21 or older who have worked one year (or two years if 100% vesting is provided). May exclude employees who work fewer than 1,000 hours per year.

 

Vesting

Gradual vesting permitted.

 

Withdrawals

Allowed only if certain events occur, such as termination of employment, death or disability. Subject to income tax; a 10% penalty may apply before age 59½.

 

Loan Feature

Permitted.¹

 

Plan Administration

IRS 5500 filings and other ERISA requirements.²

 

1EGTRRA 2001 made plan loans available to all plan participants.

2IRS 5500-series filings are generally not required for one-participant plans if total plan assets do not exceed $250,000 for the year. (Exception: Filing required for final plan year, regardless of plan size.)

This material is not intended to replace the advice of a qualified attorney, tax advisor, or insurance agent. Before your client makes any financial commitment regarding the issues discussed here, make sure he or she consults with the appropriate professional advisor.