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SARSEPSalary Reduction Simplified Employee Pension Plan (also seen as SAR-SEP)
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A SARSEP plan established prior to January 1, 1997, may continue in place, but no new SARSEP plans may be established after December 31, 1996.
The last date for adopting a SIMPLE plan depends on whether it is established as an IRA (subject to the SARSEP rule) or a 401 (k) plan.
If you like the idea of establishing a simple, inexpensive and flexible retirement plan for your business, check with a qualified financial adviser about how a SEP or SARSEP plan might work for you.
SARSEPs are generally available to companies with 25 or fewer eligible employees.
SARSEP plan sponsors must meet certain requirements each year to maintain a SARSEP's eligibility for contributions (Sec.
According to a report by the IRS's Robert Cremeens, SARSEP group analyst for publications, the Service has found that some employers do not meet the requirements every year, and therefore their plans are not eligible plans.
The Roth feature is not allowed in a SARSEP or a SIMPLE IRA plan because they are not applicable retirement plans under Sec.
The IRS recognizes four types of SEPs, the model SEP, the prototype SEP, the individually designed SEP, and the salary reduction SEP (SARSEP).
Like a 401(k) plan, a salary reduction arrangement SEP (SARSEP) allows employees to make contributions from their pre-tax income to the employer-established IRA.
* SARSEP limits: The SARSEP alternative to a qualified Sec.
401(k) ADP test to SARSEPs, the "times 2/plus 2%" alternative limitation is not available (i.e., a SARSEP must always comply with the "1.25 times" general rule).
More flexible than the unpopular SARSEPs (salary reduction SEPs), which are limited to companies with 24 or fewer employees (see page 5 1) and which require contributions from at least half of the employees.