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Our objective is to make life easy for all retirement plan stakeholders. We do our best to thoroughly explain the features and benefits of our smart retirement solutions. Sometimes, you may still have a question. Click on these Frequently Asked Questions (FAQs) to get the information you need to understand why smart retirement solutions are best in class. 

  • Can a contribution be made to a SEP IRA of a participant over age 70 1/2?
    Contributions must be made for each eligible employee in a SEP, even if over age 70 1/2. However, an employee over age 70 1/2 must take minimum distributions.
  • What is a SEP IRA?
    A Simplified Employee Pension or SEP IRA plan is a written arrangement that allows your employer to make deductible contributions to a Traditional IRA associated with a SEP plan (a SEP IRA) set up for an employee to receive such contributions.
  • Why should I choose a SEP IRA for my business?
    There are many advantages to a SEP IRA plan, including: - Contributions are a tax deductible business expense - Contributions can vary from year to year or need not be made at all - Employer may exclude certain employees - Plan documents are simple and easy to administer - Administration costs are low - No government reporting is required by employer
  • Who can establish a SEP IRA?
    Any employer.
  • How do I establish a SEP IRA plan for my business?
    Fill out the IRS form, 5305-SEP, and the Aspire SEP IRA Employer Agreement and return to Aspire. Once signed, the 5305-SEP becomes the plan’s basic legal document describing your employees’ rights and benefits. Please keep a copy for your records.
  • Must I include all employees in a SEP IRA?
    No. If you wish, you can exclude employees who are covered by a collective bargaining agreement, employees acquired in a merger or similar business transaction, or non-resident aliens to whom you did not pay any U.S. income.
  • Who is an eligible employee for a SEP IRA?
    Any employee who is at least 21 years of age, was employed by a company for 3 of the immediately preceding 5 years and has earned at least $550 for 2013 (subject to annual cost-of-living adjustments in later years) in compensation for the year. You may use less restrictive requirements to determine an eligible employee.
  • What is an example of the 3-of-5 rule?
    Assume an employer has a SEP with a requirement that an employee must work for the company in at least 3 of the last 5 years (the maximum requirement) to receive an allocation under the plan. To be eligible for the 2013 year, for example, an employee must have worked for the employer for some time (no matter how little) in any 3 years in the 5-year period 2008 – 2012. Therefore, an employee that worked for the employer in 2008, 2009 and 2012 must share in the SEP contribution made for 2013. What happens if an employee elects not to participate? The employer may establish a SEP-IRA on behalf of an employee who is entitled to a contribution under the SEP if the employee is unable or unwilling to establish a SEP-IRA.
  • What is the deadline for setting up a SEP IRA?
    A SEP can be set up for a year as late as the due date (including extensions) of the business’s income tax return for that year.
  • Why would an employer choose a SEP IRA Plan?
    Unlike qualified plans, a SEP Plan is easy to administer. The start-up and maintenance costs for SEPs are very low compared to other qualified plans. Contributions are discretionary, meaning the employer decides every year if they want to fund the SEP for that year.
  • How are contributions made to a SEP IRA?
    Under a SEP, an employer contributes directly to the SEP IRA accounts for all eligible employees (including the employer).
  • Can an employee contribute to a SEP IRA?
    A SEP IRA account is set up for employer contributions. An employee, however, may elect to contribute to the same account to meet their personal maximum, as allowed by IRS regulations. The employee would select both the SEP option on the account application AND one of the contributory account options (Traditional or Roth). No additional account fees apply. These contributions would be submitted separately by the employee to fund the account. The limits for the SEP employer contributions and the individual’s Traditional or Roth IRA contributions are different and do not affect each other. However, an employee’s participation in the SEP may affect his or her ability to deduct the Traditional IRA contributions. Please verify the IRS regulations that pertain to your particular situation.
  • How much can an employer contribute to a SEP IRA?
    An employer may contribute up to 25% of the eligible employee’s compensation provided the contribution does not exceed $51,000 for 2013.
  • Can I make a withdrawal from a SEP IRA? If so, is there a penalty?
    You may make a withdrawal from a SEP IRA. The same rules and penalty exceptions apply as in a Traditional IRA.
  • Will I be required to take distributions from my SEP IRA?
    Required Minimum Distributions (RMD) must start by April 1 of the year following the year in which you reach age 70 1/2.
  • Must the same percentage of salary/wages be contributed for all participants?
    Most SEPs, including the IRS model Form 5305-SEP, require that allocations to all employees’ SEP IRAs be proportional to their salary/wages. A self-employed owner’s contribution is based on net profit minus one-half self-employment tax minus the contribution for him or herself.
  • Can catch-up contributions be made to a SEP?
    No. SEPs are funded by employer contributions only. However, catch-up contributions can be made to the IRAs that hold the SEP contributions if the SEP IRA documents allow. The catch-up IRA contribution amount (for employees age 50 and older) is $1,000 for 2013 and later years.

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