SEP IRAs

Simplified Employee Pension (SEP) IRA
Employer Characteristics All taxable business, government entities & tax-exempt organizations
Who Must Be Covered Any employee who has worked for 3 out of the past 5 years & is age 21 or older.  Can exclude certain employees.
Maximum Allocation 2011 Generally, 25% of employee’s pay up to $49,000.
Maximum Annual Employee Deferral No employee contributions are allowed.
Required Employer Contributions None; however, a minimum allocation may be required if a contribution is made & plan is top-heavy. (A plan is top-heavy if on the determination date, the total value of the accounts of all key employees is greater than 60% of the total value of the accounts of all employees.)
Vesting Immediate 100% vesting.
Top-Heavy Testing Required Yes
Who Controls Distributions Employee
Advantage of this type of plan -Minimal paperwork & expense

-Minimal tax filing

-No requirement to make ongoing contributions

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