A SEP-IRA (Simplified Employee Pension-Individual Retirement Account) or Simplified Employee Pension plan, is a name given to a retirement plan available to self-employed people and small business owners.
Eligibility for establishing a SEP-IRA
Sole proprietors, those in partnerships, and business owners of unincorporated or incorporated businesses, including S corporations are eligible for establishing a SEP-IRA are.
Start up and administration of the plan is less expensive
Compared to the other traditional pension plans start up and administration of the plan is less expensive. There is relatively little paperwork , and no need for any annual reports to the IRS.
Each year the percentage that is contributed by the employer can fluctuate as long as it is the same for every employee. For the tax benefit up to 25% of an employee’s compensation is allowable, up to 44,000 US dollars (USD) for 2006.
Few requirements for Eligible employee
An eligible employee must be at least 21 years old and it is must that they have performed service for at least three of the last five years. Employees that are not going to be to be included in the plan are those that are covered by a union contract, non-resident aliens, and those who have earned less than 450 USD during the year.
There are possibilities that a SEP-IRA can be rolled over into another SEP-IRA, a traditional IRA, or another qualified retirement plan that allows rollovers. An employee cannot take a loan from a SEP-IRA, but he or she is rather able to make withdrawals.
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