SEP IRA PROVISIONS
A. SEPs are written plans that are 100% funded by the employer. Contributions vest
immediately. Contributions can vary from year to year and are discretionary.
B. Employees must be covered if they have:
1. Reached age 21 or over;
2. New - Earned at least $600 during 2015; and
3. Had qualifying earnings amounts for the employer during any three of the
preceding five years.
4. The above limitations are maximums and participation requirements can
be reduced by the employer when establishing the plan by completing
C. Administration fees are low and Form 5500 is never required.
D. SEPs may be established, and deposits made, up to the due date of the return
including extensions. THAT MEANS YOU CAN TAKE A DEDUCTION FOR 2015
BUT NOT FUND THE SEP UNTIL A PROPERLY EXTENDED DUE DATE FOR THE RETURN.
A CALENDAR YEAR END CORPORATION COULD WAIT UNTIL SEP 15, 2015 TO PAY.
A DIS-REGARDED ENTITY CAN WAIT UNTIL OCT 15, 2016.
E. New: For 2015, employer contributions for employees are limited to the lesser of
25% of compensation or $53,000. There is no catch up contribution permitted.
F. New: Eligible compensation is limited by IRC 415, for 2015 that amount is $265,000.
G. The percentage contribution must be the same for all qualified employees; there is
no permitted disparity.
H. For the self-employed, the deduction is limited to 25% of net income after the
owner’s contribution to the plan. The net income is reduced by:
1. 50% of the self-employment tax [IRC Sec. 401(c)(2)(A)], and
2. The self-employed health insurance deduction.