SEP IRA

Archive for July, 2005

SEP IRA Eligibility

Must everyone eligible for the SEP IRA Plan participate?

Yes.

If the employer fails to make a Contribution for every eligible employee, then none of the SEP IRA contributions made to any employee will qualify for favorable tax treatment.

Therefore, should an employee refuse or for any reason be unable to establish a SEP IRA to receive the employer’s contributions, the employer can establish a SEP IRA on the behalf of the employee to receive any SEP contributions. The employer may not, however, designate a beneficiary to receive the SEP IRA following the employee’s death.

What are the SEP IRA Fees or fees to establish a SEP IRA Plan?

Each SEP IRA account is assessed an annual account maintenance fee of approximately $15 – $50 when the account is opened and every year thereafter. This fee may be waived for large accounts depending on the Financial Institution.

There is also a termination fee of approximately $75 when the account is closed, unless the distribution is due to retirement (age 59 �), total disability or death.

Ultimately, it is the employee’s responsibility to pay his or her maintenance and termination fees for his or her own account.

There is no fee to the employer for using the Sep Ira Employer Agreement.

Must the employer file IRS Form 5500 on an annual basis for a Sep Ira Plan?

No.

There is no annual IRS Form 5500 filing requirement for a Sep Ira.

Where can I get more information about Sep Ira Plans?

IRS Publication 560, Retirement Plans for Small Business, and IRS Publication 590 provides additional information on Sep Ira Plans.

Question: Can I open up a deductible or Roth IRA if I have 401k plan?

I was wondering if I can open up a Roth IRA if I already have a 401K plan?

I also have a “non-active” (that is I’m not contributing any more) SEP IRA and an active non-deductible IRA.

Answer: Yes you can. You can also have another Traditional IRA as well. You will have income limits and also come under a combined deposit limit. See your accountant or HR person for specific details.

Simplified Employee Pension ( SEP) IRA’s are usually pre-tax as are traditional IRA’s and 401K’s

A Roth is funded with AFTER tax dollars and the capital gains are not taxed.

Were I you, I’d open the traditional IRA and roll your 401K into it ( if you are no longer employed by the company that had the 401K), but do NOT roll the 401K into the Roth, as you will pay taxes and penalties.

With that said——- If you 401K is a “matching” one, IE… your employer kicks in some sort of match up to a certain limit, then I’d stand pat on the 401K and fund it to the maximum of the employer match. EXAMPLE—- Your employer matches 25% of your contributions up to $5000. That is an IMMEDIATE 25% return on investment ( ROI) without having to do a darn thing except make a deposit….

Question: I have a 401(K) offered by my primary employer and a Roth IRA. Can I have a SEP 401(K) too if I have a 2nd job?

I have a fulltime job and I am currently maxing my 401(K) and Roth. But I also have a side job which I would like to start saving for retirement with, Can I have an SEP 401(K) or is there another option that i should be aware of. I have no employees and I am currently making 45,000 a yr from the 2nd income source

Answer: If you are self-employed, you can contribute to a SEP-IRA. If you are an employee at the second job, then you cannot contribute to a SEP-IRA.

You might look into an annuity, though.

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