You and your employees need to know that the hard work you perform will be rewarded.
One way to see your hard work pay off is by maintaining a retirement plan for your business.
SEP and SIMPLE IRA Plans offer low-cost alternatives to other qualified employer-sponsored plans, such as 401(k)s and Profit Sharing Plans. Both SEP and SIMPLE IRA Plans are relatively convenient and easy to administer, and each offers you the benefits of tax deduction and tax deferral.
SEP vs. SIMPLE IRA
|
Comparison |
SEP IRA |
SIMPLE IRA |
| Employer Size |
No limit |
100 or fewer employees |
| Establishment Deadline |
Tax filing due date, plus extensions |
Generally, October 1st of each year (subject to an exception for newly established businesses) |
| Annual Employee Salary Reduction Contributions |
Not available |
Lesser of 100% of compensation or $11,500 for each of 2010 and 2011. Participants age 50 or over may also make catch-up deferral contributions of $2,500 in 2010 and 2011 for a total of $14,000 in 2010 and 2011. |
| Annual Employer Contributions (Note: Special calculation rules and definitions apply for self-employed individuals.) |
Lesser of up to 25% of employee's compensation or $49,000 for each of 2010 and 2011.
|
Required employee deferral match of 3% of compensation (employer may elect a lower limit of at least 1% in any 2 of 5 years), or nonelective contribution for all eligible employees of 2% of compensation. |
| Vesting |
100% immediate
|
100% immediate |
| Investment Discretion |
Self-directed accounts only |
Self-directed accounts only |
| Combination of Plans |
Employer may operate any other plan in the same year within funding and coverage limits. |
Employer may not operate any other plan in the same year. |
Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein, except as otherwise agreed to in writing by Morgan Stanley Smith Barney. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their tax or legal advisors before engaging in any transaction involving SEP IRAs, SIMPLE IRAs, SAR-SEP IRAs or other tax-advantaged investment vehicles.
GP10-02661P-N12/10
