Selecting the Simple Sep Retirement Plan | Home and Family

Choosing a trustee for the Sep retirement plan is a critical decision. The firm that holds the account for the business will be responsible for executing investments on behalf of the participants and for providing paperwork and notifications to the employees regarding their account. The trustee for a Sep retirement plan is usually a bank, brokerage house, or other IRS-approved financial institution. The legal document for the plan is Form 5305-SEP, which the employer completes and retains as the reference describing the plan?s terms. A copy is provided to the participating employees . The business owner is responsible for forwarding the employee contributions to the trustee, and keeping the trustee aware of all status changes among the workers . For example , new hires may be added to the Sep retirement plan as long as they meet eligibility requirements. To be eligible for the Sep retirement plan, the employee must be at least 21 years of age and have worked for the company three of the past five years. Contribution limits per employee will be capped at the lower of $49,000 annually or 25% of the worker?s compensation. The business owner is not required to make contributions each year. It?s up to the employer to decide on the percentage if a contribution is to be made, but contributions must be uniform for all eligible employees. Money from a Sep retirement plan can be withdrawn at any time, but is subject to income tax for the year in which the employee takes a distribution . Withdrawing money from the Sep prior to age 59 ? years old can subject the withdrawal to an additional 10% penalty tax. Withdrawals from the SEP must start when the participant reaches age 70 ? years old. Participants are not allowed to take loans from their Sep retirement plan, but are allowed to roll it over tax-free into another SEP IRA, another traditional IRA, or another employer?s qualified retirement plan.

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