How can I reduce my SEP expenses?
September 26, 2008
From: Rick
Date: Fri, 08 Feb 2008
Mike,
What can a small business owner do to limit the expense of funding retirement benefits of employees when contributing to a SEP?
Thank you,
Dina
Answer
Date: 09 Mar 2008
Hello Rick,
A SEP has the most stringent nondiscrimination requirements of the retirement plan alternatives. All employees must be covered who (1) are at least age 21; (2) performed services for the employer during at least three of the immediately preceding five years; and (3) received at least $500 of compensation from the employer for 2007 or 2008.
Therefore, SEPs favor employers who have young employees and high turnover.
If you don't fit that profile, consider hiring a pension consultant and implementing a different type of qualified retirement plan. You might find the reduction in contributions for employees justifies the fees.
Good luck!
Mike Gray
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