Form 5305-Sep - Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement

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5305-SEP
OMB No. 1545-0499
Simplified Employee Pension—Individual
Form
Retirement Accounts Contribution Agreement
Do not file
(Rev. December 2004)
with the Internal
Department of the Treasury
(Under section 408(k) of the Internal Revenue Code)
Revenue Service
Internal Revenue Service
makes the following agreement under section 408(k) of the
(Name of employer)
Internal Revenue Code and the instructions to this form.
Article I—Eligibility Requirements (check applicable boxes—see instructions)
The employer agrees to provide discretionary contributions in each calendar year to the individual retirement account or individual
retirement annuity (IRA) of all employees who are at least
years old (not to exceed 21 years old) and have performed
services for the employer in at least
years (not to exceed 3 years) of the immediately preceding 5 years. This simplified
employee pension (SEP)
includes
does not include employees covered under a collective bargaining agreement,
includes
does not include certain nonresident aliens, and
includes
does not include employees whose total
compensation during the year is less than $450*.
Article II—SEP Requirements (see instructions)
The employer agrees that contributions made on behalf of each eligible employee will be:
A.
Based only on the first $205,000* of compensation.
B.
The same percentage of compensation for every employee.
C.
Limited annually to the smaller of $41,000* or 25% of compensation.
D.
Paid to the employee’s IRA trustee, custodian, or insurance company (for an annuity contract).
Employer’s signature and date
Name and title
Instructions
1. Currently maintain any other qualified
SEP: (1) employees covered by a collective
retirement plan. This does not prevent you
bargaining agreement whose retirement
from maintaining another SEP.
benefits were bargained for in good faith by
Section references are to the Internal
you and their union, (2) nonresident alien
Revenue Code unless otherwise noted.
2. Have any eligible employees for whom
employees who did not earn U.S. source
IRAs have not been established.
Purpose of Form
income from you, and (3) employees who
3. Use the services of leased employees
received less than $450* in compensation
Form 5305-SEP (Model SEP) is used by an
(described in section 414(n)).
during the year.
employer to make an agreement to provide
4. Are a member of an affiliated service
Contribution limits. You may make an
benefits to all eligible employees under a
group (described in section 414(m)), a
annual contribution of up to 25% of the
simplified employee pension (SEP) described
controlled group of corporations (described in
employee’s compensation or $41,000*,
in section 408(k).
section 414(b)), or trades or businesses under
whichever is less. Compensation, for this
common control (described in sections 414(c)
Do not file Form 5305-SEP with the IRS.
purpose, does not include employer
and 414(o)), unless all eligible employees of
Instead, keep it with your records.
contributions to the SEP or the employee’s
all the members of such groups, trades, or
For more information on SEPs and IRAs,
compensation in excess of $205,000*. If you
businesses participate in the SEP.
see Pub. 560, Retirement Plans for Small
also maintain a salary reduction SEP,
5. Will not pay the cost of the SEP
Business (SEP, SIMPLE, and Qualified Plans),
contributions to the two SEPs together may
contributions. Do not use Form 5305-SEP for
and Pub. 590, Individual Retirement
not exceed the smaller of $41,000* or 25% of
a SEP that provides for elective employee
Arrangements (IRAs).
compensation for any employee.
contributions even if the contributions are
You are not required to make contributions
Instructions to the Employer
made under a salary reduction agreement.
every year, but when you do, you must
Use Form 5305A-SEP, or a nonmodel SEP.
Simplified employee pension. A SEP is a
contribute to the SEP-IRAs of all eligible
Note. SEPs permitting elective deferrals
employees who actually performed services
written arrangement (a plan) that provides you
cannot be established after 1996.
with an easy way to make contributions
during the year of the contribution. This
includes eligible employees who die or quit
toward your employees’ retirement income.
Eligible employees. All eligible employees
Under a SEP, you can contribute to an
working before the contribution is made.
must be allowed to participate in the SEP. An
employee’s traditional individual retirement
Contributions cannot discriminate in favor of
eligible employee is any employee who: (1) is
account or annuity (traditional IRA). You make
highly compensated employees. Also, you may
at least 21 years old, and (2) has performed
contributions directly to an IRA set up by or
not integrate your SEP contributions with, or
“service” for you in at least 3 of the
for each employee with a bank, insurance
offset them by, contributions made under the
immediately preceding 5 years. You can
company, or other qualified financial
Federal Insurance Contributions Act (FICA).
establish less restrictive eligibility
institution. When using Form 5305-SEP to
requirements, but not more restrictive ones.
establish a SEP, the IRA must be a Model
If this SEP is intended to meet the
traditional IRA established on an IRS form or
Service is any work performed for you for
top-heavy minimum contribution rules of
a master or prototype traditional IRA for
any period of time, however short. If you are
section 416, but it does not cover all your
which the IRS has issued a favorable opinion
a member of an affiliated service group, a
employees who participate in your salary
letter. You may not make SEP contributions
controlled group of corporations, or trades or
reduction SEP, then you must make minimum
to a Roth IRA or a SIMPLE IRA. Making the
businesses under common control, service
contributions to IRAs established on behalf of
agreement on Form 5305-SEP does not
includes any work performed for any period
those employees.
establish an employer IRA described in
of time for any other member of such group,
Deducting contributions. You may deduct
section 408(c).
trades, or businesses.
contributions to a SEP subject to the limits of
section 404(h). This SEP is maintained on a
When not to use Form 5305-SEP. Do not
Excludable employees. The following
calendar year basis and contributions to the
use this form if you:
employees do not have to be covered by the
*
For 2005 and later years, this amount is subject to annual cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in the Internal Revenue
Bulletin, and on the IRS website at
5305-SEP
For Paperwork Reduction Act Notice, see page 2.
Cat. No. 11825J
Form
(Rev. 12-2004)

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