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A Simplified Employee Pension (SEP) plan may be the easiest, most attractive employee retirement plan you can offer. Funded entirely by you, the employer, you have total flexibility in determining the annual amount or percentage contribution, from 0 percent to 25 percent of each participating employee's annual earned income (up to $40,000).
Employer contribution to SEPs are treated as a business expense in the calendar year and can be made until April 15. Employee contributions to their individual retirement annuities (IRAs) are unaffected by a SEP. All employees over 21 years of age, who have worked for the company for three of the last five years must be covered. The elected percentage contribution must be applied to each eligible employee's earned income.
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