SEP IRAs

Which Plan is Right for You?
Choosing the retirement plan for your business is one of the most important business decisions you make. A Simplified Employee Pension Plan (SEP) provides an employer with a simplified way to make contributions toward an employee’s retirement.

Eligibility
The employer may not maintain any other qualified retirement plan and must include all eligible employees in the SEP.

Contribution Limit
Contributions are directed into a Traditional IRA held by each employee. Contributions for each eligible employee may not exceed 25 percent of each individual’s compensation or up to $45,000 ( up to $46,000 for 2008), whichever is less. Within a given company, the rate of contribution must be the same for all participants.

Deduction Limit
The employer’s deduction limit for contributions made may not exceed 25 percent of the aggregate compensation paid to eligible participants. Also, the employer may be eligible for a tax credit for administrative costs for the first three years of a new plan. Contributions are not tax deductible for the employee. However, the employer’s contributions are not included in the employee’s gross income.

Plan Benefits

• Less expensive than a 401(k) plan
• Allows business owner to take a tax deduction
• Boosts morale and helps to retain employees
• Attracts competent new employees to the business
• Administrative ease
• Not required to fund each year or at a specific level

The above is general information regarding SEP Plans, and does not take your unique, personal circumstances into account. It is not intended to be complete and should not be relied upon in making final decisions concerning IRA accounts. The information is not meant to constitute legal or tax advice. Please contact your tax professional for full details or visit the IRS website at www.irs.gov.