What are the main features of the SEP Plan (Simplified Employee Pension Plan as covered by the IRC Code Section408(K)?
There are several features of the SEP plan as discussed below.
- SEPs are written plans that are 100% funded by the employer.
Contributions vest immediately and can vary from year to year and are discretionary.
- What are the coverage rules of the SEP Plans?
All Employees must be covered if they have;
1. Reached age 21 or over;
2. Earned at least $550 during 2010; and
3. Performed any services for the employer during any three of the preceding five years.
- Administration fees are low, and Form 5500 is not required.
This is a great advantage of the plan, ie, less filing requirements!
- SEPs may be established, and deposits made, up to the due date of the return, including extensions.
- For 2010, employer contributions for employees are limited to the lesser of 25% of compensation or $49,000.
- The percentage contribution must be the samefor all qualified employees.
- For the self-employed, the deduction is limited to 25% of net income after the contribution to the plan and after the deduction.