Providing a retirement plan for your employees can be a key benefit for attracting and keeping the best workers.

A Simplified Employee Pension or SEP plan is a simple for any business to establish. SEP plans combine administrative simplicity for you with a wide range of investment options for your employees. Additionally, contributions to SEPs are tax-deductible for employers.

What tax benefits do SEPs offer?

The amount you and your employees contribute to your SEP plan and any earnings remain tax-deferred until employees take distributions. Beyond that, distributions are taxed as ordinary income for your employees just like Traditional IRA distributions.


Are employee deferrals allowed under SEP Plans?

Only SEP Plans that were properly established before December 31, 1996 allow your employees to withhold part of their salaries to contribute into the plan. SEP Plans established after then do not allow for employee deferrals. (SIMPLE-IRA Plans do allow employee deferrals.)


Must all of my employees participate in our SEP Plan?

In general, all of your employees are eligible to participate, but you may exclude:

• Employees under age 21 (you can also select a lower age)
• Employees who have not worked in up to three of the prior five years
• Certain union or nonresident alien employees, and:
• Employees not earning the minimum annual amount (indexed at $450 for tax year 2002)

Employees meeting the plan's eligibility requirements may not choose to exclude themselves from the SEP Plan, and you as the employer must contribute to them.

How can I learn more about SEP Plans?

To establish a SEP Plan or learn more about setting one up for your employees or visit the Academy Bank location nearest you today.