SEP-IRAs, which benefit self-employed individuals and small business owners, offer many advantages over
other retirement plans, such as:
Ease of establishing and maintaining.
No mandatory contributions or annual tax filings; reduced paperwork.
In addition to helping earn potential tax credits, tax-deductible contributions can help decrease current taxes.
Tax-deferred compounding of earnings can help both employers and employees build retirement assets. Consult your tax
advisor for more information.
Who is eligible to open a SEP IRA?
You can use a SEP-IRA if you have income from self-employment (either full- or part-time) or are employed by someone
who establishes a SEP for employees.
All contributions made under a SEP are employer contributions. An employee cannot defer
a portion of her/his salary and contribute it to a SEP-IRA.
Employers can contribute up to 25% of an employee's compensation**
($46,000 per participant in 2008).
You are not required to contribute the same percentage of compensation every year; you may vary the percentage
each year, or skip a year altogether.
However, in any given year, employers must contribute the same percentage of compensation for each eligible
employee.
Employer contributions must be made by the due date (April 15th, excluding extensions) for filing federal income
tax. Consult your tax advisor for more information regarding SEP IRAs.
** Maximum compensation on which contributions can be based is $230,000 for the 2008 plan year. For
self-employed individuals, compensation is net earnings from self-employment. For further
clarification contact your tax advisor.
Withdrawals before age 59 ½: Although a 10% federal penalty applies to early withdrawals, the IRS grants exceptions for:
Certain unreimbursed medical expenses
Medical insurance payments, providing certain conditions are met
Disability, if certain conditions are met
Payments to designated beneficiaries, in the event of death of the IRA owner
Payments received as an annuity
Qualified higher-education expenses
Purchase of a first home (up to a lifetime maximum of $10,000)
