Ch. 24 Simplified Employee Pension Flashcards
Simplified Employee Pension
an employer-sponsored plan in which employer contributions are made to participating employees’ IRAs
Contributions are much ____ than traditional IRAs
higher
When is it indicated?
- want simpler, less costly qualified plan
2. when it is too late to adopt a qualified plan since qualified plans must be adopted before the end of the plan year
only ____ can contribute
employers
6 advantages
- not complicated and inexpensive
- portable benefits
- funding flexibility
- benefit from positive investment
- before 1/1/97, permits salary reduction contributions by employees
- can be adopted at any time up to the tax return filing date
3 disadvantages
- not reliable as stand-alone retirement plan
- annual contribution may be restricted to lesser amount
- distributions do not qualify for the special 10 year averaging rule
employees are ___ vested
100%
The plan must cover all employees who are at least ____ and have worked ____ out of the preceding 5 years
21;3
are part time employees included in the count?
yes
contributions need not be made for employees whose earnings were less than ____
$550
Are there minimum funding requirements?
no
the employer can make or omit contributions in any year ____ tax consequences
without
The plan can exclude _____ employees if retirement benefits have been the subject of good faith bargaining
union
how are distributions treated in a a SEP?
life a traditional IRA
Who can an SEP cover?
sole proprietors or partners as well as a regular employees
