SEP-IRA, EMPLOYER IRA PLANS INFORMATION & ORDER AGREEMENT

Transcription

1 SEP-IRA, EMPLOYER IRA PLANS INFORMATION & ORDER AGREEMENT 6900 Westcliff Drive, Ste. 609 Las Vegas, NV Fax (702) * Ph. (866) Note: This application is for use in opening an employer SEP-IRA plan, with American Estate & Trust, LC acting as custodian for each employee s IRA. Type of Employer Entity For The SEP-IRA: Sole Proprietorship Corporation or Partnership Trust Limited Liability Co. Name and Contact Information For the Employer Type Checked Above Full Name: Phone: ( ) - Mail Address: City, State, Zip: Today s Date: Taxpayer ID No. * : - Fax No. ( ) - Identify Only One Or Two Authorized Signers and Their Titles For The Employer Listed Above. A Second Party Is Not Required: No. 1 Name: Official Title: (President, general partner, trustee, manager, etc.) Address: City/ST/Zip: Phone: ( ) - No. 2 Name: Official Title: (President, general partner, trustee, manager, etc.) Address: City/ST/Zip: Phone: ( ) - List by name the employees who are to be included in the SEP-IRA plan. Include the company owner(s) and all employees: I acknowledge receipt of the American Estate & Trust two page overview and the IRS Publication 560 partial reprint regarding SEP-IRA rules and operation, and acknowledge that the above named company is solely responsible for the correct and legal usage of the SEP-IRA: (Signature) or Fax this form to American Estate & Trust. A service representative will contact you to finish setting up your company s SEP-IRA program: info@trusteeamerica.com, Fax: (702) v

2 Page 2 - SEP-IRA Employer App and Information Simplified Employee Pension Plans, The SEP-IRA Business Owners: Contribute Up To $49,000 Per Year To Your Own IRA Approved For Sole/Self Employed, And Up To 100 Employees And Many Other Huge Advantages Over Other IRAs and Retirement Plans The SEP-IRA plan, or just SEP, is a provision under federal law which allows employers to put company money into its employees IRAs as a special type of company retirement plan. SEPs are allowed for sole employee/owner businesses as well as larger businesses with up to 100 employees. The employer may contribute up to 25 percent of each employee s compensation or $49,000, whichever amount is less, a huge advantage over regular IRAs, even if the company has only one employee the owner. SEP-IRAs Work Great For: Sole employee/owners and the self-employed, especially when combined with the IRAcentral self directed IRA. Contributions to a SEP-IRA are tax deductible to the company, and the company pays no taxes on the earnings inside those SEP-IRAs. No IRS filings are required from the company. SEP plans allow company contributions for employees who are older than age 70-½, the only way persons of this age can have contributions made to a Traditional IRA. The SEP plan is vastly simpler and less expensive to set up and operate than any other company retirement plan, and at the same time is much more powerful and flexible. For Free Employer Information or General Assistance regarding a New SEP-IRA, contact: Scott Janko, American Estate & Trust, LC, Toll Free: For Existing SEP-IRA Plans, contact Scott Janko (above) for superior SEP plan and IRA custodial services, industry best pricing and widest flexibility for investing IRA funds. MORE SEP-IRA INFO: IRA owners (the employees) may separately make their own contributions to the SEP-IRA (but the total employer and employee contribution cannot exceed the 25% - $49,000 limit). Sole proprietors, partnerships, limited liability companies, regular C corporations and S corporations may all set up SEP-IRAs. The company is not locked into making contributions every year. In fact, the employer decides each year whether, and how much, to contribute to its employees SEP-IRAs. If the company files an extension on its tax return, the SEP contributions can be delayed until the return is filed, up to October 15 th of the year following the contribution year, whereas with regular IRAs the prior year s contribution must be made by April 15 th. This is another major benefit of SEPs compared to regular IRAs and other company retirement plans. Generally, the company does not file any tax forms or documents with the IRS, and SEP-IRA contributions made by the employer are not included on the employees W-2 tax form. Employees do list and deduct any of their own IRA contributions on their federal tax return, but the employer s contribution is only deductible by the employer, not the employee. Employers who adopt an SEP plan must contribute to it for all employees, including the employer personally and part time or seasonal employees (union employees and those earning under $500 per year do not have to be included). In most cases the employer is also required to include leased employees in the SEP. A uniform formula must be used for all employees in calculating contribution amounts. Normally the required formula is a fixed or uniform percentage of each employee s pay, though this may be a variable percentage from year to year, and the amount is determined solely by the employer.

3 Page 3 - SEP-IRA Employer App and Information Employee salary cannot be reduced to provide or make up for any of the funds used for the company s contribution. The employees salary is only used as a reference for calculating the employer s maximum contribution amounts. The company may be eligible for a tax credit of up to $500 per year for each of the first 3 years for the cost of starting the plan. The IRA which employee s must use is the Traditional IRA only, no Roth IRAs are permitted. Contributions made by the company are always 100 percent vested with the employee. That is, the money belongs exclusively to the employee s IRA, subject to normal IRA rules. Because SEP contributions become the employee s IRA assets, these SEP-IRA assets may generally be transferred to other retirement plans in the same manner as any regular IRA. SEP-IRA Fee Schedule, American Estate & Trust, LC IRA Fees Plan set up for employer None Ongoing or annual employer fees None Set up cost per each employee/participant 50 Annual fee required from each employee participant* Free to $225* * Fees may be discounted for six or more employees, contact the person listed above for more info. For full fee details which employee participants may incur, including no-fee accounts, see our standard IRA fee schedule by clicking on IRA Fees on the left side of the home page of

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5 However, a partner is not an employer for retire- Net earnings from self-employment do not ment plan purposes. Instead, the partnership is include items excluded from gross income (or treated as the employer of each partner. their related deductions) other than foreign earned income and foreign housing cost Highly compensated employee. A highly amounts. compensated employee is an individual who: For the deduction limits, earned income is Owned more than 5% of the interest in net earnings for personal services actually renyour business at any time during the year dered to the business. You take into account the or the preceding year, regardless of how income tax deduction for one-half of much compensation that person earned or self-employment tax and the deduction for con- received, or tributions to the plan made on your behalf when figuring net earnings. For the preceding year, received compen- Net earnings include a partner s distributive sation from you of more than $100,000 (if share of partnership income or loss (other than the preceding year is 2007, $105,000 if separately stated items, such as capital gains the preceding year is 2008, and $110,000 and losses). It does not include income passed if the preceding year is 2009), and, if you through to shareholders of S corporations. so choose, was in the top 20% of employ- Guaranteed payments to limited partners are ees when ranked by compensation. net earnings from self-employment if they are paid for services to or for the partnership. Distri- Leased employee. A leased employee who is butions of other income or loss to limited partnot your common-law employee must generally ners are not net earnings from self-employment. be treated as your employee for retirement plan For SIMPLE plans, net earnings from purposes if he or she does all the following. self-employment is the amount on line 4 of Short Schedule SE (Form 1040), Self-Employment Provides services to you under an agree- Tax, before subtracting any contributions made ment between you and a leasing organizato the SIMPLE plan for yourself. tion. 2. Simplified Employee Pension (SEP) Topics This chapter discusses: Setting up a SEP How much to contribute Deducting contributions Salary reduction simplified employee pen- sions (SARSEPs) Distributions (withdrawals) Additional taxes Has performed services for you (or for you Qualified plan. A qualified plan is a retirement and related persons) substantially full time plan that offers a tax-favored way to save for Reporting and disclosure requirements for at least 1 year. retirement. You can deduct contributions made to the plan for your employees. Earnings on Useful Items Performs services under your primary direction or control. these contributions are generally tax free until You may want to see: distributed at retirement. Profit-sharing, money Exception. A leased employee is not purchase, and defined benefit plans are quali- Publication treated as your employee if all the following fied plans. A 401(k) plan is also a qualified plan. 590 Individual Retirement Arrangements conditions are met. Participant. A participant is an eligible em- (IRAs) 1. Leased employees are not more than 20% ployee who is covered by your retirement plan Choosing A Retirement Solution for of your non-highly compensated work See the discussions of the different types of Your Small Business force. plans for the definition of an employee eligible to participate in each type of plan SEP Checklist 2. The employee is covered under the leasing organization s qualified pension plan SARSEP Checklist Partner. A partner is an individual who shares 3. The leasing organization s plan is a money 4333 SEP Retirement Plans for Small ownership of an unincorporated trade or busipurchase pension plan that has all the fol- Businesses ness with one or more persons. For retirement lowing provisions. plans, a partner is treated as an employee of the 4336 SARSEP for Small Businesses a. Immediate participation. (This requireyear? partnership Have you had your Check-Up this for SIMPLE IRAs, SEPs, and ment does not apply to any individual Self-employed individual. An individual in whose compensation from the leasing Similar Retirement Plans business for himself or herself, and whose busiorganization in each plan year during ness is not incorporated, is self-employed. Sole 4407 SARSEP Key Issues and the 4-year period ending with the plan proprietors and partners are self-employed. Assistance year is less than $1,000.) Self-employment can include part-time work. b. Full and immediate vesting. Not everyone who has net earnings from Forms (and Instructions) c. A nonintegrated employer contribution self-employment for social security tax purposes is self-employed for qualified plan purposes. W-2 Wage and Tax Statement rate of at least 10% of compensation for each participant. See Common-law employee, earlier. Also see 1040 U.S. Individual Income Tax Return Net earnings from self-employment on this page SEP Simplified Employee However, if the leased employee is your com- Pension Individual Retirement mon-law employee, that employee will be your In addition, certain fishermen may be consid- Accounts Contribution Agreement employee for all purposes, regardless of any ered self-employed for setting up a qualified pension plan of the leasing organization. plan. See Publication 595, Capital Construction 5305A-SEP Salary Reduction Simplified Fund for Commercial Fishermen, for the special Employee Pension Individual Net earnings from self-employment. For rules used to determine whether fishermen are Retirement Accounts Contribution SEP and qualified plans, net earnings from self-employed. Agreement self-employment is your gross income from your 8880 Credit for Qualified Retirement trade or business (provided your personal serv- Sole proprietor. A sole proprietor is an indi- Savings Contributions ices are a material income-producing factor) mi- vidual who owns an unincorporated business by nus allowable business deductions. Allowable himself or herself, including a single member 8881 Credit for Small Employer Pension deductions include contributions to SEP and limited liability company that is treated as a disqualified Plan Startup Costs plans for common-law employees and regarded entity for tax purposes. For retirement the deduction allowed for one-half of your plans, a sole proprietor is treated as both an A SEP is a written plan that allows you to self-employment tax. employer and an employee. make contributions toward your own retirement Chapter 2 Simplified Employee Pension (SEP) Page 5

6 and your employees retirement without getting If you adopt an IRS model SEP using Form be in the form of money (cash, check, or money involved in a more complex qualified plan SEP, no prior IRS approval or determina- order). You cannot contribute property. Howtion Under a SEP, you make the contributions to letter is required. Keep the original form. Do ever, participants may be able to transfer or roll a traditional individual retirement arrangement not file it with the IRS. Also, using Form over certain property from one retirement plan to (called a SEP-IRA) set up by or for each eligible 5305-SEP will usually relieve you from filing another. See Publication 590 for more informaemployee. A SEP-IRA is owned and controlled annual retirement plan information returns with tion about rollovers. by the employee, and you make contributions to the IRS and the Department of Labor. See the You do not have to make contributions every the financial institution where the SEP-IRA is Form 5305-SEP instructions for details. If you year. But if you make contributions, they must be maintained. choose not to use Form 5305-SEP, you should based on a written allocation formula and must SEP-IRAs are set up for, at a minimum, each seek professional advice in adopting a SEP. not discriminate in favor of highly compensated eligible employee (defined below). A SEP-IRA When not to use Form 5305-SEP. You employees (defined in chapter 1). When you may have to be set up for a leased employee cannot use Form 5305-SEP if any of the followof all participants who actually performed per- contribute, you must contribute to the SEP-IRAs (defined in chapter 1), but does not need to be ing apply. set up for excludable employees (defined later). sonal services during the year for which the 1. You currently maintain any other qualified contributions are made, including employees Eligible employee. An eligible employee is an retirement plan other than another SEP. who die or terminate employment before the individual who meets all the following require- contributions are made. 2. You have any eligible employees for whom ments. IRAs have not been set up. Contributions are deductible within limits, as discussed later, and generally are not taxable to Has reached age You use the services of leased employees, the plan participants. Has worked for you in at least 3 of the last who are not your common-law employees A SEP-IRA cannot be a Roth IRA. Employer 5 years. (as described in chapter 1). contributions to a SEP-IRA will not affect the Has received at least $500 in compensatraditional IRA. 4. You are a member of any of the following amount an individual can contribute to a Roth or tion from you in This amount inmembers unless all eligible employees of all the of these groups, trades, or busi- creases to $550 in nesses participate under the SEP. Time limit for making contributions. To de- duct contributions for a year, you must make the TIP You can use less restrictive partici- a. An affiliated service group described in contributions by the due date (including exten- pation requirements than those listed, section 414(m). sions) of your tax return for the year. but not more restrictive ones. b. A controlled group of corporations described in section 414(b). Contribution Limits Excludable employees. The following emc. Trades or businesses under common Contributions you make for 2008 to a comployees can be excluded from coverage under a control described in section 414(c). mon-law employee s SEP-IRA cannot exceed SEP. the lesser of 25% of the employee s compensa- Employees covered by a union agreement 5. You do not pay the cost of the SEP contri- tion or $46,000 ($49,000 for 2009). Compensaand whose retirement benefits were barcontributions butions. tion generally does not include your gained for in good faith by the employees to the SEP. The SEP plan docu- union and you. Information you must give to employees. ment will specify how the employer contribution You must give each eligible employee a copy of is determined and how it will be allocated to Nonresident alien employees who have Form 5305-SEP, its instructions, and the other participants. received no U.S. source wages, salaries, information listed in the Form 5305-SEP instrucor other personal services compensation tions. An IRS model SEP is not considered Example. Your employee, Mary Plant, from you. For more information about nonadopted until you give each employee this infor- earned $21,000 for The maximum contriresident aliens, see Publication 519, U.S. mation. bution you can make to her SEP-IRA is $5,250 Tax Guide for Aliens. (25% x $21,000). Setting up the employee s SEP-IRA. A SEP-IRA must be set up by or for each eligible Contributions for yourself. The annual limits employee. SEP-IRAs can be set up with banks, on your contributions to a common-law eminsurance companies, or other qualified finanployee s SEP-IRA also apply to contributions Setting Up a SEP cial institutions. You send SEP contributions to you make to your own SEP-IRA. However, spethe financial institution where the SEP-IRA is cial rules apply when figuring your maximum There are three basic steps in setting up a SEP. maintained. deductible contribution. See Deduction Limit for 1. You must execute a formal written agree- Deadline for setting up a SEP. You can set Self-Employed Individuals, later. ment to provide benefits to all eligible em- up a SEP for any year as late as the due date ployees. (including extensions) of your income tax return Annual compensation limit. You cannot for that year. consider the part of an employee s compensa- 2. You must give each eligible employee cer- tion over $230,000 when figuring your contributain information about the SEP. Credit for startup costs. You may be able to tion limit for that employee. However, $46,000 is claim a tax credit for part of the ordinary and 3. A SEP-IRA must be set up by or for each the maximum contribution for an eligible emnecessary costs of starting a SEP that first beeligible employee. ployee. These limits increase to $245,000 and came effective in For more information, $49,000, respectively, in TIP see Credit for startup costs under Reminders, Many financial institutions will help you earlier. set up a SEP. Example. Your employee, Susan Green, earned $210,000 for Because of the maximum contribution limit for 2008, you can only contribute $46,000 to her SEP-IRA. How Much Can I Contribute? Formal written agreement. You must exe- More than one plan. If you contribute to a cute a formal written agreement to provide ben- defined contribution plan (defined in chapter 4), efits to all eligible employees under a SEP. You annual additions to an account are limited to the can satisfy the written agreement requirement The SEP rules permit you to contribute a limited lesser of $46,000 or 100% of the participant s by adopting an IRS model SEP using Form amount of money each year to each employee s compensation. When you figure this limit, you 5305-SEP. However, see When not to use Form SEP-IRA. If you are self-employed, you can con- must add your contributions to all defined contri SEP, below. tribute to your own SEP-IRA. Contributions must bution plans. Because a SEP is considered a Page 6 Chapter 2 Simplified Employee Pension (SEP)

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