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Rules for Simplified Employee Pension Plans better known as a SEP Plans
Posted on: 2007-01-05 14:09:18 Rules for Simplified Employee Pension Plans better known as a SEP Plans Harald Anderson A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP automatically belongs to the employee. Thus, the employee has the right to take his SEP IRA account money with him whenever he stops working for the company. Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. The SEP IRA rules dictate that if the business contributes for one employee, (i.e., the owner), then the business must contribute proportionately for all of the employees. With few exceptions, anyone who works for the business must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who: 1. Has not worked for the company during three out of the last five years. 2. Has not reached age 21 during the year for which contributions are made. 3. Received less than $450 in compensation (subject to cost-of-living adjustments) during the year. About the author: Harald Anderson is the founder and Chief Analyst of eOptionsTrader.com The following help center is designed to provide you with a high level of SEP IRA service.
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