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SEP Plans

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18 Things to Know About SEP Plans

1) Employer Established:

A SEP is an employer-established plan; employees cannot set up their own SEP.

2) Written Arrangement:

A SEP is a written arrangement (a plan). It provides a simple, tax favored way for you to provide for your own retirement and to help employees save for theirs.

3) Self-Employed Persons:

If you're self-employed, you can set up a SEP-IRA for yourself (and employees) and make tax deductible contributions towards your own retirement.

Contributions to a SEP-IRA and earnings are tax-deferred until distributed.

4) IRA-Based:

SEPs are IRA-Based plans, and therefore, are simpler and less expensive to set up and administer than the more complex qualified plans (e.g., 401(k) plans).

5) Control:

A SEP-IRA is owned and controlled by the employee.

6) Reporting Requirements:

There are no annual reporting requirements for a SEP.

7) Vesting:

Contributions by the employer for plan participants are immediately 100% vested for each plan participant (the money belongs to them).

8) Corporations:

Corporations can also use SEPs.

9) Form W-2 reporting for SEP-IRA contributions:

SEP-IRA contributions are NOT included in an employee's gross compensation on Form W-2 (e.g., wages, salary, bonuses, tips, commissions).

SEP-IRA contributions are NOT subject to:

Note: Only an employer may establish a SEP plan and contribute to an employee's SEP-IRA (and the employer's own SEP-IRA).

An employee is not permitted to:

10) FUTA Tax:

SEP-IRA contributions are not subject to FUTA tax.

11) Additional are taxes imposed for the following:

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SEP Plans: 18 Things to Know About SEP Plans-Continued (12-15)

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