SEP IRA

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What is the Contribution limit on multiple retirement plans with one employer?

are salary deferral plans that are funded with employee contributions.

• Money purchase,
• profit sharing, and
• SEP IRA plans are

employer-funded retirement plans.

If one employer establishes a combination of salary deferral and employer-funded retirement plans, the combined limit is $44,000 in 2006.

In 2006, an employee can defer $15,000 into a salary deferral plan and have $29,000 contributed by the employer into an employer-funded retirement plan.

The employer cannot fund a SIMPLE IRA plan along with another retirement plan in the same year.

What is the Contribution limit on multiple plans with multiple employers?

If you have earned income from multiple unrelated employers, including being self-employed, you can have

a maximum of up to 25% of compensation or $44,000 contributed into plans for each employer

Example 1:

Mr. Smith has a money purchase or profit sharing plan by his employer at work and also has self-employment income. Even though he is a participant in his employer’s retirement plan, he is also able to establish a retirement plan for his self-employment income up to $44,000 or 25% of net self-employment income.

Example 2:

In 2006, an individual works at two jobs. Employer 1 has a 401k plan and Employer 2 has a money purchase plan. The individual can defer $15,000 into his/her 401k plan at job 1 and if, the individual’s compensation is high enough, his employer can contribute $44,000 into his/her money purchase plan at job 2, assuming the employers are unrelated.

If an employee is covered by an employer retirement plan can he/she still contribute to Traditional IRA and Roth IRA?

Even if an employee is covered by a retirement plan, he/she may still be eligible to make traditional or Roth IRA contributions (age or income limits may apply).

What is the Contribution limit to Employer Funded Plans?

Certain retirement plans, such as

are funded with employer contributions.

For 2006, the employer Contribution limit,

the lesser of 25% of compensation or up to $44,000

may be contributed to

• a single money purchase,
• profit sharing or
• SEP IRA plan or
• a combination of these retirement plans (with multiple employers assuming the employers are neither under common control nor members of an affiliated group).

If two (or more) employers are under common control or are members of an affiliated group, the employers are considered one employer and only up to the lesser of 25% or $44,000 of compensation can be contributed between them.

Special contributions rules apply when the employee is also covered by a defined benefit pension plan.

If you have multiple IRA acccounts, you can make multiple IRA contributions. For example if you are a SEP IRA, a SIMPLE IRA, a Keogh plan, and a 401k, how can you make multiple IRA contributions? The examples below illustrate how you can make multiple IRA contributions.

What is the Contribution limit to Salary Deferral (Employee Funded) Retirement Plans?

For 2006 an individual under 50 years old may defer a maximum of $15,000 in total to all salary deferral plans (such as 401k retirement plan, 403b retirement plan, Section 457, and SARSEP IRA plans) offered by the individual’s employers.

The limit for all SIMPLE IRA Plans for 2006 is $10,000. So, if you are deferring $10,000 into a SIMPLE IRA at job 1 during 2005, you can defer only $4,000 into a 401k at job 2. But if the retirement plan at job 2 is also a SIMPLE IRA plan, then you cannot defer anything into that second retirement plan, because you have reached the $10,000 limit for all of his/her SIMPLE IRA Plans.

It is your responsibility to ensure that you do not defer more than the IRA Contribution limits whether it be a SIMPLE IRA Contribution limit, a SEP IRA Contribution limit, a Keogh plan Contribution limit or other retirement plan Contribution limits. For SIMPLE IRA, it is $10,000 in 2006. For 401k it is $15,000 in 2006.

Salary deferrals are generally made from compensation paid during a calendar year.

Catch-up Contributions: There is a catch-up provision for participants age 50 or older at any time during the tax year that allows them to contribute