Below are general guidelines to the various business retirement accounts available. While this gives a general outline, please contact your tax accountant for any tax advice and eligibility. 

 

SEP 

  •  Overview: The Simplified Employee Pension (SEP) IRA is a program that permits employers to make tax deductible contributions on behalf of themselves and their employees without complicated administration and high cost
  • Advantages of SEP:
    • Plan documents are simple and easy to administer
    • Flexible contribution percentage from year to year
    • Requires no non-discrimination testing or Form 5500 filings
    • Administration cost is low
  • Annual Contributions:
    • Employer: Discretionary contribution allocated uniformly. Total contributions per employee are the lesser of 25% of compensation or $53,000 for 2016 ($54,000 for 2017)
    • Employees:May make their normal IRA contribution to the IRA funding the SEP. These contributions are treated in the same manner as contributions to a traditional IRA
  • Availability to: Any employer can establish a SEP.
  • Deadlines: Established and funded by tax filing deadline, including extensions
  • Vesting: Immediately 100% vested
  • Loans: Not Available
  • Withdrawals: In-service withdrawals permitted, subject to income tax and 10% early withdrawal penalty may apply (see IRA Withdrawals)

 

SIMPLE IRA 

  • Overview: The Savings Incentive Match Plan for Employees (SIMPLE IRA) permits employers to offer a salary deferral plan to their employees without complicated administration and high cost
  • Advantages of SEP:
    • Includes features of a 401(k) plan, such as salary deferrals, but is easier to administer
    • Requires no top-heavy, non-discrimination testing, or IRS Form 5500 filings
    • Administration responsibilities are few and cost is low
  • Annual Contributions:
    • Employer: Required contribution allocated uniformly using one of two methods:
      • 100% matching contribution on salary reduction contributions up to 3% of compensation, or
      • non-elective contribution for all eligible employees of 2%
    • Employees: pre-tax deferrals up to $12,500 in 2016 and 2017, plus $3,000 catch-up (age 50 and over).
  • Availability to: Employers with 100 or fewer eligible employees and those who generally offer no other tax-advantaged savings plans during the current year.
  • Deadlines: May be set up on any date between January 1 and October 1 provided the plan sponsor did not previously maintain a SIMPLE IRA plan. If the plan sponsor previously maintained a SIMPLE IRA plan, a SIMPLE IRA may only be set up on January 1. 
  • Matching and non-elective employer contributions must be made to the financial institution maintaining the SIMPLE IRA no later than the due date for filing the employer’s income tax return, including extensions, for the taxable year that includes the last day of the calendar year for which the contributions are made.
  • Vesting: Immediately 100% vested
  • Loans: Not Available
  • Withdrawals: In-service withdrawals permitted, subject to income tax and 10% early withdrawal penalty may apply (see IRA Withdrawals)

 

Note: If the withdrawal occurs during the 2-year period beginning on the date on which the individual first participated in and SIMPLE IRA plan maintained by the employer, the 10% penalty may be increased to 25%

  

For further details about retirement options, please call us at 800-541-FUND or you can visit the website of our trustee, Principal Trust:     

Go to Equity Institutional's Website