Intro to SEP
Easy. In a word, that defines the Simplified Employee Pension, commonly known as, “SEP.” Basically, it’s a plan that allows your business to make tax-deductible contributions to SEP IRAs set up for you and your qualifying employees.
A SEP has a lot of the same tax advantages as other retirement plans for businesses, but it frees your business from many of the administrative requirements.
SEPs may be easy, but picking the right plan for your business isn’t. Let us help you determine which plan is right for your business. Then we can help you set up the plan and give you guidance in the years to come. Get in touch with a COUNTRY Financial representative to get started.
Who it's for
There are a lot of factors to consider when you’re choosing a retirement plan for your business.
Sole Proprietor, Partnership, Corporation
You might consider a SEP if you own a small business, and you want a retirement plan that’s easy to start and maintain. You can set up a SEP if you’re a sole proprietor, partnership or corporation.
How it works
The simplicity of a SEP is attractive to a lot of business owners, but like most decisions, it pays to have all the facts. Here are some of the big ones to consider:
Can I set participation rules?
All eligible employees – including part-timers, seasonal and those who terminate employment during the year – must be included in the plan. However, you may restrict eligibility by requiring employees to meet all of the following:
- Be at least 21
- Performed service for you in at least 3 of the last 5 years
- Received at least $600 in compensation within the year the contribution is made (subject to cost-of-living adjustments)
While the employer makes all the contributions to the employee accounts, employees can withdraw the money at any time. They will, of course, have to pay applicable taxes and penalties.
How do contributions work?
- You, as employer, make the contributions; employees do not make contributions
- SEP IRA limits on contributions are set by the IRS and periodically adjusted. For 2016, the contribution limit is 25 percent of each employee’s compensation, but no more than $53,000
- If you’re self-employed, there are special SEP IRA rules that apply to you, and your maximum contribution is effectively reduced to 20 percent of your net earnings
- You have to contribute the same percentage of compensation to each eligible employees’ SEP-IRA
- Your contributions are tax deductible
- Because the contributions are tax-deductible, they aren’t included on your employees’ W-2.
- Of course, this information has to be shared with the IRS and your employees. COUNTRY Trust Bank can take care of that with an annual statement of contribution and fair market value information.
- You don’t have to make a contribution every year, and the amounts can vary in the years you do contribute. But it must be based on a formula that may not discriminate in favor of highly compensated employees (HCEs)
With COUNTRY Trust Bank, the employer has a choice of how SEP IRA contributions are invested.
Your employees can pick their own investments from a wide variety of mutual funds, stocks, and bonds.
If your employees aren’t investment savvy or don’t want to manage their own accounts, put our investment pros to work.
Call us at 855-535-PLAN (855-535-7526) to find out how we can help you!
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Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®. Please see our Terms & Conditions for more information about COUNTRY Trust Bank and its affiliates.
COUNTRY Financial® and our representatives cannot give tax advice. Any information we provide reflects our understanding of current tax laws, which are subject to change and reinterpretation. See your tax advisor regarding your personal circumstances.