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Thus, the employee has the right to take his SEP IRA account money with him whenever he stops working for the company. Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. However, you can exclude from participating in the SEP plan anyone who: ' Has not worked for the company during three out of the last five years. ' Has not reached age 21 during the year for which contributions are made. ' Received less than $450 in compensation (subject to cost-of-living adjustments) during the year. SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors). Article: A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA interest for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP belongs to the employee. Thus, the employee has the right to take his SEP IRA account rendered money with him whenever he stops working for the company. Any size fair trade can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small taking a role with few employees. The SEP IRA rules dictate that if the commerce contributes for one employee, (i.e., the owner), then the conglomerate corporation must contribute proportionately for all of the employees. With few exceptions, anyone who works for the impersonation must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who: • Has not worked for the second team during three out of the last five years. • Has not reached age 21 during the year for which contributions are made. • Received less than $450 in compensation (subject to cost-of-living adjustments) during the year. SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors). The SEP IRA contribution limit goes up to $42,000 for 2005, and is subject to cost-of-living adjustments for later years. SEP-IRA rules do not provide for supplemental catch-up contributions for those 50 years old or over. A growing number of self-employed individuals with no employees are abandoning the SEP-IRA for a newer type of retirement plan named the Solo 401(k) or Self-Employed 401(k). The two main reasons for the switch are 1) they can generally contribute much more to a Solo 401(k) than they can under a SEP IRA, and 2) Loans are countersigned under a Solo 401(k), whereas loans are prohibited under a SEP-IRA. Example: Henry, age 52, a realtor received $60,000 in compensation from self-employment income in 2004. For 2004, he could contribute a maximum of $27,152 in a Solo 401(k) versus a maximum of $11,152 under a SEP IRA. However, the Solo 401(k) does not work for businesses with employees. Thus, if your mate plans to hire employees or currently has a few employees, the SEP IRA may be your best escape clause as a retirement plan that is inexpensive and simple to operate. QuitSmokingRightNow. - Quit smoking right now without patches, pills or gums, and without gaining any extra weight - guaranteed. Starting A Child Daycare. - Complete business package to help you easily and quickly start your own profitable home-based day care business! Article Index: | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 |
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