Don't go it alone

To contribute or not to contribute

The decision of whether the owners want to match part of the employee's contribution to a retirement plan will influence what type of plan is right for the firm.

Discrimination and safe harbor

IRS guidance

Simplified Employee Pension (SEP) 

As a simplified plan, the administrative costs should be lower than for other, more complex plans. In a SEP, an employer contributes to traditional Individual Retirement Arrangements (IRAs) set up for employees (including self-employed individuals), subject to certain limits. The following information is from IRS Publication 560:

To establish a SEP, you

• Can be a business of any size, even self-employed.
• Must adopt a SEP plan document.
• Generally cannot have any other retirement plan.

Advantages of a SEP:

• Easy to set up and operate -- usually just a phone call to a financial institution can get you started.
• Administrative costs are low.
• Plan can have flexible annual contribution obligations -- a good plan if cash flow is an issue.