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Simplified
Employee Pensions (SEPs)...
What
Small Businesses Need To Know
Simplified Employee Pensions,
known as SEPs, represent an easy, low-cost retirement plan option
for employers. Instead of establishing a separate retirement plan,
in a SEP the employer makes contributions to his or her own Individual
Retirement Account (IRA) and the IRAs of his or her employees, subject
to certain percentages of pay and dollar limits. Employers who establish
SEPs can:
- Make tax deductible
contributions to their own and their employees' IRAs.
- Omit or reduce contributions
in years when contributions are unaffordable.
Avoid the administrative
costs and the reporting requirements of conventional plans.
Whether a SEP is appropriate for your business will depend on factors
such as revenue, firm size and the age, compensation and retirement
needs of the business owner and work force. You may want to discuss
other retirement plan options with a professional advisor.
What Are SEP-IRAs
SEPs are retirement programs established by you, as an employer,
which allow you to provide retirement benefits for yourself and
your employees without paying the start-up and operating costs of
conventional plans.
SEPs allow an employer to establish and make contributions to IRAs.
The two critical differences between SEP-IRAs and other IRAs are
that:
- SEP contributions
are generally made by employers, not employees.
- The amounts contributed
to SEPs can be much larger than the amounts contributed to IRAs.
As a general rule, up
to 25 % of each employee's pay (or 20% for the self-employed) can
be put into a SEP-IRA each year.
To set up your SEP, first consult your professional tax advisor
then visit TrustBank to establish your plan.
To learn more about SEP's click
here.
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