Publication 560 - Retirement Plans For Small Business - 2001 Page 4
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26Table 1. Key Retirement Plan Rules for 2001
Type
of
Last Date for Contribution
Maximum Contribution
Maximum Deduction
When To Set Up Plan
Plan
1
15% of all participants’
Any time up to due date of
SEP
Due date of employer’s
Smaller of $35,000 or 15%
2
compensation
excluding
employer’s return (including
return (including extensions).
of participant’s
2
SEP contributions.
extensions).
compensation.
SIMPLE
Elective employer
Employee: Salary reduction
Same as maximum
Any time between 1/1 and
IRA
contributions: 30 days after
contribution, up to $6,500.
contribution.
10/1 of the calendar year.
and
the end of the month for
SIMPLE
which the contributions are
For a new employer coming
3
401(k)
to be made.
into existence after 10/1, as
soon as administratively
feasible.
Matching contributions or
Employer contribution:
Same as maximum
nonelective contributions:
Either dollar-for-dollar
contribution.
Due date of employer’s
matching contributions, up to
return (including extensions).
3% of employee’s
4
compensation,
or fixed
nonelective contributions of
2
2% of compensation.
Due date of employer’s
Defined Contribution Plans
Defined Contribution Plans
By the end of the tax year.
Qualified
return (including extensions).
Note: For a defined benefit
Money Purchase: Smaller of
Money Purchase: Same as
1
plan subject to minimum
$35,000 or 25%
of
maximum contribution.
2
funding requirements,
participant’s compensation.
contributions are due in
quarterly installments. See
Profit-Sharing: Smaller of
Profit-Sharing: 15% of all
Minimum Funding
1
$35,000 or 25%
of
participants’ compensation
Requirements in chapter 4.
2
2
participant’s compensation.
excluding plan contributions.
Defined Benefit Plans
Defined Benefit Plans
Amount needed to provide
Based on actuarial
an annual benefit no larger
assumptions and
than the smaller of $140,000
computations.
or 100% of the participant’s
average taxable
compensation for his or her
highest 3 consecutive years.
1
Net earnings from self-employment must take the contribution into account.
2
Compensation is generally limited to $170,000.
3
Does not apply to SIMPLE 401(k) plans. The deadline for qualified plans applies instead.
4
Under a SIMPLE 401(k) plan, compensation is generally limited to $170,000.
We respond to many letters by telephone.
contributions (not including rollovers), and for-
Therefore, it would be helpful if you would in-
feitures allocated to a participant’s account.
clude your daytime phone number, including the
1.
Annual benefits. Annual benefits are the ben-
area code, in your correspondence.
efits to be paid yearly in the form of a straight life
Help from the Internal Revenue Service
annuity (with no extra benefits) under a plan to
(IRS). See chapter 6 for information about get-
which employees do not contribute and under
Definitions
ting publications and forms. For further informa-
which no rollover contributions are made.
tion, call Employee Plans’ customer service at
1 – 877 – 829 – 5500 (toll-free) from 8:00 a.m. to
Business. A business is an activity in which a
You Need To
6:30 p.m. Eastern Time, Monday through Fri-
profit motive is present and economic activity is
day.
involved. Service as a newspaper carrier under
Know
age 18 is not a business, but service as a news-
Note: All references to “section” in the fol-
paper dealer is. Service as a sharecropper
lowing discussions are to sections of the Internal
under an owner-tenant arrangement is a busi-
Revenue Code (which can be found at most
Certain terms used in this publication are de-
ness. Service as a public official is not.
libraries) unless otherwise indicated.
fined below. The same term used in another
publication may have a slightly different mean-
Common-law employee. A common-law em-
ing.
ployee is any individual who, under common
law, would have the status of an employee. A
Annual additions. Annual additions are the
leased employee can also be a common-law
total of all your contributions in a year, employee
employee.
Page 4
Chapter 1 Definitions You Need To Know
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