Simplified Employee Pension Plan

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Simplified Employee Pension (SEP) Plan

A SEP plan is an employer-sponsored, tax-favored retirement plan that offers small businesses an attractive alternative to standard profit sharing plans

In a simplified employee pension (SEP) plan, an employer deposits contributions into the IRA accounts of each participant rather than into an employer trust account, thereby simplifying the accounting process.

Advantages to establishing a SEP:

  • Easy setup
  • Contributions are tax deductible to the employer and all earnings are tax deferred for employees.
  • Minimal administrative costs
  • Contribution flexibility: Employers can make annual discretionary contributions of up to 25% of each eligible employee’s compensation.
  • Tax-planning flexibility: SEP plans can be established until tax-filing deadlines, including extensions
  • Investment flexibility: Because employees can choose where their accounts are established, they may have a wide range of investments from which to choose.

Frequently Asked Questions:

If a business owner later decides that another type of plan best suits his or her needs, can the employee’s SEP IRA account balances be rolled over into a qualified retirement plan?

Yes, SEP IRA assets can be rolled over into a qualified retirement plan provided the plan accepts rollovers.

If a person has a side business, but is covered by a retirement plan at his or her regular job, can he or she deduct SEP IRA contributions made based on his or her compensation from the side business?

SEP contributions are fully deductible (within allowable limits) regardless of active participant status in other company-sponsored plans

At Craig Wealth Advisors we further simplify the administration of your SEP plan. As the plan’s custodian, we will receive contributions, provide detailed records of transactions, prepare statements reflecting all assets, make distributions and handle the tax-reporting functions. You and your employees will receive consolidated statements reflecting all pertinent account activity during the year. This is just another way Craig Wealth Advisors makes having a retirement plan for your business simple and straightforward.

To learn if a SEP plan is appropriate for your business, contact us!