Simplified Employee Pension Plan (SEP-IRA)
A comfortable retirement is considered the reward for a lifetime of hard work. But when you’re running a small business, you may be too busy with today’s demands to “go shopping” for a retirement plan. You know all the reasons why you should have one. But you wonder where you’ll ever find the time to sort through all of the different types available. And if you would decide on one, where would you find the time to take care of all the details that come with it?
Fortunately, Hilliard Lyons offers some alternatives to high-cost, high-maintenance retirement plans. One such plan is the SEP-IRA. SEP-IRAs have been designed specifically with America’s small businesses and self-employed individuals in mind. They’re easy — and affordable — to establish and to maintain.
Why let any more time slip by? Remember, time is on your side. The sooner you start a plan, the more time you and your employees will have to build a comfortable retirement. And the better the chance that it will indeed be rewarding.
- Designed to meet the needs of small businesses and self-employed individuals
- Easy-to-establish and easy-to- administer — thanks to a minimum of paperwork
- IRA-based — contributions go into Individual Retirement Accounts (IRAs) for each active participant in the plan
- Tax-advantaged and offer tax-deferred growth potential
Who can establish a SEP-IRA?
Employers of all types — sole proprietorships, partnerships, corporations including Subchapter “S” corporations, independent contractors — are eligible to establish a SEP-IRA. Likewise, self-employed individuals — whether they work full-time or earn income from part-time consulting — are eligible.
Contact your Wealth Advisor for more details.
Who Can Participate in a SEP-IRA?
Any employee who meets all of these criteria is eligible:
- Is age 21 or older
- Has worked for your organization for any length of time in three of the past five years
- Has earned at least $600 in the current year
Employers may make these criteria less restrictive.
Employer Contributions to the SEP-IRA:
Employers may make contributions to each eligible employee’s account not to exceed the lesser of 25% of the employee’s compensation or $55,000. The employer’s deduction limit is 25% of compensation.*
You have the flexibility to change the contribution level from year to year — contributing from zero to the maximum. Employer contributions are not required each year. However, in each year that they are made, contributions must not discriminate in favor of highly compensated employees.
All contributions must be fully vested.
Employees are not permitted to make contributions to their own SEP-IRA. All contributions to employee accounts are made by the employer.
Tax Advantaged Now and in The Future
Tax-deductibility: For employers, any contributions made to their employees’ and their own accounts may be considered tax-deductible business expenses for federal tax purposes, subject to certain statutory limits.
Tax-deferral: All contributions and any growth of the SEP-IRA are tax-deferred, that is, not subject to current taxation.
Taxes will not be due until the account holder begins to withdraw money from it.
No annual plan report: No report needs to be filed with the IRS.
An annual statement: Must be provided to each participant to inform them of the amount contributed to their IRA.
Investment Education for Every Participant
At Hilliard Lyons, we supply your business with the key items needed to establish a SEP-IRA, including adoption agreements and applications for review by your Legal Counsel.
We also make available to you and your employees a broad menu of non-FDIC-insured investment choices. You can invest your plan accounts in individual stocks and bonds, plus mutual funds from a number of leading fund companies. And when it comes to making your investment decisions, you’re not left on your own. One of our Wealth Advisors will be available to provide you and your employees with investment education so that you can construct a portfolio tailored to your individual investment personality, risk tolerance and timeline.
* Special rules apply when figuring the maximum deductible contribution if you are self- employed, see IRS Publication 560.
Securities are offered through J.J.B. Hilliard, W.L. Lyons, LLC | Member of the NYSE, FINRA & SIPC | Hilliard Lyons does not provide tax or legal advice. You should consult with your own tax or legal advisor for additional information and personalized advice regarding the matters described herein. | © 2018 J.J.B. Hilliard, W.L. Lyons, LLC.
J.J.B. Hilliard, W.L. Lyons, LLC | Member NYSE, FINRA, & SIPC