Business IRAs

Simplified Employee Pension Plan

Choosing the retirement plan for your business is one of the most important business decisions you’ll 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 $53,000 for 2015/16, whichever is less. Within a given company, the rate of contribution must be the same for all participants.

Note: Contributions received to a SEP IRA via ACH are considered an employer contribution and are considered current year contributions.

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

Savings Incentive Match Plan For Employees

A SIMPLE IRA, or Savings Incentive Match Plan for Employers, is a retirement plan for small business owners with 100 or fewer employees who earned at least $5,000 in the preceding year.  In addition, an employer who sponsors a SIMPLE IRA Plan generally may not maintain any other qualified plan in which employees accrue benefits in the same calendar year.  SIMPLE plans are funded by employer contributions and elective employee salary deferrals. Employer contributions are tax-deductible and employee contributions are excluded from income for federal income tax purposes.

Who may be a likely candidate for a SIMPLE IRA?

  • An employer who wants a retirement plan with minimal costs.
  • An employer who wishes to establish a plan with an employee contribution component.
  • Self-employed individuals who could defer a larger percentage of their compensation due to the flat dollar contribution limit.

This plan is primarily employee-funded, with generally a 3% (of compensation) employer matching contribution requirement.1 It provides a low-cost alternative for employers who cannot sponsor a 401(k) plan, but still want to offer a retirement program. Contribution limits for 2015/16 are $12,500 ($15,500 if age 50 or older).

Our Financial Advisors are available to meet with you at any People's United Bank location.  Call today at 1- 800-392-3009 to schedule an appointment or click here to find a Financial Advisor near you.

Related Information


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Disclaimer


1The employer must match employee deferrals dollar-for-dollar up to 3% of the employees' compensation (compensation includes employee deferrals), or the employer may choose to make a 2% of compensation, non-elective contribution to all eligible employees (even those who choose not to defer).

The above is general information regarding SIMPLE 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.


Investment and Insurance Products:

  • Not Insured by FDIC or any Federal Government Agency
  • Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate
  • May Lose Value

Investment and insurance products are offered through People’s Securities, Inc., a Broker/Dealer, member of FINRA and SIPC, an insurance agency and a registered investment advisor. People’s Securities, Inc. is a subsidiary of People’s United Bank, N.A.

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