A SEPIRA, or Simplified Employee Pension plan, is intended for sole proprietors or small business owners with variable earnings that are looking for a retirement plan with minimal administration.
A SEPIRA is an employer only funded plan for businesses of any size. Employers can contribute up to 25% of total compensation up $53,000 in 2016. A SEPIRA allows for two allocation methods; pro-rata (equal percentage for everyone) or integrated with Social Security. Social Security integration uses a contribution formula that takes Social Security payments into account. Using such a formula allows higher paid employees to receive a higher contribution percentage. As with profit sharing, SEPIRA contributions are discretionary and can be skipped altogether in a given plan year. Unlike profit sharing plans, SEP IRAs require no government reporting; however the eligible requirements are more lenient and top-heavy testing is required. New plans must be established by December 31 of the plan year.
Call your financial advisor today to explore if a profit-sharing plan is right for you. To learn more access Retirement Plans for Small Businesses Employer Guide.