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SEP IRAs

Simplified Employee Pension plans (SEPs) provide a simple way to contribute to both your retirement and your employees'. Contributions are made directly into IRAs that you and your employees establish.

 

What employers are eligible to establish a SEP IRA plan?

Entities such as:

  • Corporations
  • Sole proprietorships
  • Partnerships
  • Tax exempt organizations
  • Government entities, etc.

 

How can a SEP plan benefit your small business?

  • Tax deduction:  Employer contributions made to an employee’s IRA are generally tax deductible as a business expense.
  • Tax deferral:  The money contributed to an IRA will continue to accumulate tax-deferred until you withdraw the money.
  • Flexibility: You are not locked into making contributions every year. You decide each year whether, and how much, to contribute.
  • Attract and retain employees:  By providing a retirement plan, you will be able to recruit and keep valuable employees.

 

How does a SEP plan work?

SEP contributions are discretionary contributions made by you, the employer, that may be funded by different types of investments, including stocks, bonds, certificates of deposit (CDs) or mutual funds.1 You may make deductible contributions of 0–25% of compensation for each eligible employee.

Total contributions cannot exceed $50,000 for the 2012 tax year. Determination of the employees eligible for contribution, their contribution amount and other administrative requirements are dictated by the SEP plan document and applicable law. Please see your financial advisor for further information.

 

Distributions from a SEP IRA

Funds in a SEP IRA may be withdrawn at any time, subject to a 10% penalty if you are under 59½.

Retirement Planning

Financial planning can be complex. We provide information and strategies to help you navigate the world of investing.

Learn more >


1 If you are investing in a variable annuity through a tax-advantaged retirement plan such as a Roth IRA, you will receive no additional tax advantage from the annuity.  Under these circumstances, you should only consider an annuity because of its other features, such as lifetime income payments and death benefit protection.

Current tax planning strategies emphasize the deferral of current income taxes, on the basis that your federal income tax rate may be lower at retirement. As you decide how much to defer, please keep in mind that federal income tax rates are unpredictable and subject to significant fluctuation. It is possible that federal income tax rates at the time you take a distribution (e.g., at retirement) may be higher than tax rates at the time of deferral. Other factors, including any other sources of income and state income tax rates, may also change the tax bracket and overall tax rate to which you may be subject in the future. Please consult with your tax advisor for an individualized tax planning strategy and advice. The Hartford does not predict or in any way guarantee favorable tax results.

This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.