Here is a brief overview of requirements for SIMPLEs and SEPs. Great checklist from IRS for SIMPLEs.
SIMPLE IRA .
a. Corp cannot maintain another retirement plan (so NO to SEP if there is a SIMPLE)
b. Must be offered to all employees who have earned at least $5,000 from employer in any prior two years and are reasonably expected to do so in the current year.
c. Employee elective deferral limited to $11,500 in 2011 AND 2012 (add $2500 if age 50 or older at END of the year).
d. Match employee elective deferral dollar for dollar up to 3% of wages – can go as low as 1% in any 2 out of 5 years. OR employer contributes 2% of wages for ALL employees including NONparticipants for wages up to $245K.
e. Employer contributions are required.
f. Employer contributions are deductible to employer and deferred to participant.
g. Earnings are tax deferred until withdrawn
h. Deductible contributions allowed after age 70 ½
i. “Elective Deferrals must be deposited as soon as possible but no later than 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash.”
j. Penalty for early withdrawal (before fully reaching age 59 ½) – 10% of distribution. But 25% (!!) if withdrawn less than 2 years from date of first participation in the plan.
k. Employer contributions are due by tax return due date including extensions.
a. Corp CAN maintain another retirement plan (So OK for SEP and 401k but not SEP and SIMPLE)
b. Must be offered to employees who are at least 21 and who worked for employer anytime during at least 3 of last 5 years, and received wages of at least $550 per year.
c. Employer may contribute up to 25% of wages (must be same percentage for everyone) with maximum contribution of $49,000 for 2011 and $50,000 for 2012. These are aggregate maximums – so if you have more than one plan, you may not fund more than a maximum of $49,000/$50,000. Payroll of $245K/$250K needed to max.
d. Contributions must be cash and not property.
e. Early withdrawal penalty = 10%
f. Can make contributions after age 70 ½ if there is still earned income.
g. But – must start withdrawing at age 70 ½
h. Contributions must be made by extended due date of return.
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