S E P - Simplified Employee Pension Plan

Simplified Employee Pension (SEP) FAQ's Forms

A simplified employee pension (SEP) is a written plan that allows you to make contributions toward your own (if you are self-employed) and your employees' retirement without getting involved in a more complex qualified plan.

Under a SEP, you make the contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. SEP-IRAs are owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained.

SEP-IRAs are set up for, at a minimum, each eligible employee (defined later). A SEP-IRA may have to be set up for a leased employee (defined earlier under Definitions You Need To Know), but does not need to be set up for excludable employees (defined later).

Eligible employee. An eligible employee is an individual who meets all the following requirements.

FAQs regarding the Required Minimum Distributions
Insights into the Required Minimum Distributions under the Final and Temporary Regulations under IRC Sections 401(a)(9), 408(a)(6) and 408(b)(3).

How do I establish a SEP?

You establish a SEP by adopting a SEP agreement and having your eligible employees establish SEP-IRAs. There are three basic steps in setting up a SEP, all of which must be satisfied.

You must execute a formal written agreement. You can satisfy this written agreement by adopting an Internal Revenue Service (IRS) model SEP using Form 5305-SEP, Simplified Employee Pension – Individual Retirement Accounts Contribution Agreement. You may also use a prototype SEP that was approved by the IRS. Approved prototype SEPs are offered by banks, insurance companies, and other qualified financial institutions. Additionally, an individually-designed SEP may be adopted.
You must give each eligible employee certain information about the SEP. If you establish the SEP using the Form 5305-SEP, the information must include a copy of the Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. If you use a prototype SEP or an individually-designed SEP, you must provide similar information.
A SEP-IRA must be set up for each eligible employee. SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. The SEP-IRA is owned and controlled by the employee and you send the SEP contributions to the financial institution where the SEP-IRA is maintained.