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Why you need
to know about Simplified Employee Pensions
Virginia
Business
June 2003
Simplified
Employee Pensions (SEPs) are a retirement program set
up by businesses that allow them to provide benefits
for employees without having to pay many of the operating
and administrative costs of conventional plans. Because
this is the simplest retirement plan available and requires
minimal reporting, many small businesses benefit from
using it. The SEP lets employers make tax-deductible
contributions to their employees’ IRAs as well
as their own, and reduces contributions in years when
they are unaffordable.
Why
you should set up an SEP:
• It can provide a significant source of income
at retirement.
• Contributions are tax deductible. Businesses
pay no taxes on the earnings on investments.
• There's no requirement about making contributions
in future years. A small business can decide each year
whether to pay into the SEP and how much to contribute.
• Once money is in an SEP, the business owner has
no further responsibility for the amounts contributed.
The funds are managed by a financial institution.
• SEPs can be established and operated without
the administrative expenses, consulting fees or commissions,
unlike conventional retirement plans.
• No need to file documents with the government.
• SEPs can be set up by sole proprietors, partnerships
and corporations.
• Contributions can be deducted in a previous tax
year if made by the due date of the employer’s
tax return, including any extensions.
Data:
U.S. Department of Labor
Return
to Virginia Business - June 2003
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