Simplified Employee Pension Plan (SEP)
Looking for an easy, low-cost retirement plan for you and your
employees? Why not consider a SEP? Simplified Employee Pension Plans
(SEPs) can provide a significant source of income at retirement by
allowing employers to set aside money in retirement accounts for
themselves and their employees. Under a SEP, an employer contributes
directly to traditional individual retirement accounts (SEP-IRAs) for
all employees (including the employer). A SEP does not have the start-up
and operating costs of a conventional retirement plan and allows for a
contribution of up to 25% of each employee's pay.
Contributions to a SEP are tax deductible and your business pays no
taxes on the earnings on the investments.
The employer is not locked into making contributions every year. In
fact, you decide each year whether, and how much, to contribute to your
Generally, you do not have to file any documents with the government.
You 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.
An eligible employee is an employee who:
Is at least 21 years of age, and
Has performed service for you in at least 3 of the last 5 years.
Once an employee meets the eligibility requirements, they cannot be
excluded from the plan.
FNCB SEP funds are invested in Certificates of Deposit.
Participants cannot take loans from their SEP-IRA
Participants can make withdrawals at any time, to
be rolled over tax-free to another SEP-IRA, to another traditional
IRA, or to another employer's qualified retirement plan.
Funds withdrawn from a SEP-IRA (and not rolled over to another plan)
are subject to income tax for the year in which an employee receives a
distribution. If you are under 59½, additional taxes may apply.
Participants must start taking a minimum
withdrawal when they reach the
age of 70½.