11 SEP and SIMPLE IRA Tax Facts to Know

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Simplified employee pension plans and savings incentive match plans for employees — known as SEPs and SIMPLE IRAs — can provide a significant source of income at retirement for your clients.

SEPs allow employers to set aside money in retirement accounts for themselves and their employees. This type of plan does not have the startup and operating costs of a conventional retirement plan and allows a contribution of up to 25% of each employee’s pay.

SIMPLE IRAs are similar in that they allow small-business owners to establish a retirement account for their employees with minimal startup resources. But there are key differences between the two investment vehicles, especially when it comes to contributions and benefits.

Are you advising your clients correctly when it comes to SEPs and SIMPLE IRAs? See the gallery for 11 important tax and financial planning questions and answers advisors should be aware of regarding these investment vehicles and the taxation rules around them, according to ALM’s Tax Facts Online.

(Graphics: Chris Nicholls/ALM)

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