SEP-IRA
A SEP-IRA allows employers, usually small businesses and self-employed individuals, to offer their employees tax-deferred retirement accounts with the flexibility of an IRA. It avoids a lot of the paperwork and regulatory complexity that comes with a 401(k) program. The employer receives a tax deduction for the contribution, and each employee has their own Traditional IRA. Here are some highlights of a SEP-IRA plan:
- An employer can contribute up to the greater of 25% of an employee's compensation or $42,000 for 2005 and $45,000 for 2006.
- The employee doesn't pay taxes on the SEP-IRA until the employee makes a distribution.
- Just like regular IRAs, the contribution deadline for the prior year is April 15.
- There are no forms to file with the IRS or plan agreements to keep.
- For more information on SEP-IRA, read IRS Form 5305-SEP [pdf].
Create a SEP-IRA at Parnassus through our online system. It takes about 10 minutes. Or you, download an IRA Application [pdf] and send the application back to us.