A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small-business owners. Its key features are highlighted below. When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA; employer contributions are then made into each eligible employee's SEP-IRA.

Plan Eligibility
You can establish a SEP-IRA if you:

• are a sole proprietor, in a partnership, or a business owner (of either an unincorporated or incorporated business, including Subchapter S corporations);
• earn any self-employed income by providing a service, either full-time or part-time, even if you are already covered by a retirement plan at your full-time job.

Tax advantages
Tax-deductible contributions

• Up to 25% of compensation, as much as $46,000.*

Tax-deferred growth potential

• Any investment earnings grow tax-deferred until withdrawn.

SEP-IRA Deadline
The deadline to open and contribute to a SEP-IRA is your tax filing deadline (including any extensions). For most self-employed individuals and small-business owners, that deadline is usually April 15.

Contribution Flexibility
No annual contribution required

• Contribution percentage can vary each year, from 0% - 25% of compensation (maximum contribution is $46,000) per participant for the 2008 plan year.*
• All SEP-IRA contributions must be made by the employer, and the same percentage of compensation must be contributed for each eligible employee (based on W-2 wages) including the employer.

*The maximum compensation on which contributions can be based is $230,000. For self-employed individuals, compensation means earned income.

Other Key Advantages

• No complicated forms to fill out.
• No annual reports for you to file with the IRS.
• Contributions are not mandatory each year.
• Ability to offer another qualified retirement plan in addition to the SEP-IRA.

 

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