Setting Up A Sep IRA Can Be Easy
The Sep IRA (Simplified Employee Pension Individual Retirement Account) is a simple retirement plan that allows an employer to make contributions for their own retirement or their employees' retirement without getting overwhelmed by a more complicated plan such as the Keogh plan. Sep IRA is a simpler and less expensive option for the self-employed and small businesses. For the self-employed, the contributions are based on the net profit of the business. The employer can contribute to their employee's funds by up to 25% of the employee's wages but if the employee leaves the company, they may keep all of the retirement contributions as of that date.
The employer can establish less restraining requirements than the standard IRS regulations if necessary. These eligibility requirements state to allow an employee contribute to a Sep IRA, they must be at least 21 and have worked with the company for at least three of the last five years and have received at least $450 in compensation for the tax year. Withdrawals should begin by the time the employee is 70 ½. There are no contribution obligations set on the Sep IRA. It is not compulsory for an employer to maintain a certain level or frequency of contributions to the plan therefore they have the flexible ability to alter the contributions made each year based on the profits of the business for the given year.
It is relatively easy to enroll in the Sep IRA as all it takes is filling out a two page application form. The employee must complete an investment application supplied by the company who will hold the funds. The Sep IRA does not require IRS annual returns so nothing has to be filed with the IRS in order for the retirement plan to be established. Sep IRA contributions are made by the employer by the date that the company's tax return is due which means that the contributions are deductible for that tax year. For the self-employed, there are few administration costs and if there are employees involved they must receive the same benefits as a SEP plan and funds can be invested similarly to other IRAs.
The Sep IRA plan we had with our business was easily setup and had very few administrative tasks. In fact, it only required a couple of hours per year for paperwork. It was simple to setup and the deductions each pay period were easy to calculate. We chose a large mutual fund company for our investments. They had a website which made managing the contributions very easy. They also had direct withdrawl from the corporate bank account. All we had to do was to go to the website, enter in each employees' contribution and company match, and the rest was done automatically by the mutual fund company. A Sep IRA is an easy way to start a retirement savings plan with a minimal amount of work. It is also an excellent benefit you can give your employees, especially if you offer a corporate match.
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