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:
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.
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:
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.