SEP IRA Employer Match
A small business owner has twelve employees, most of which have been able to be discriminated against because lack of time of service. The SEP IRA has been established for three years now and there are now two employees that have fulfilled the time of service obligation, as of last October of 2011. The question is, is once that employee satisfies the time of service obligation, how much does the employer have to match. Do they take into consideration the entire wages paid for the 2011 year or does it just begin as of the date that they reached the time of service mark. For example, do they just have to match a percentage based off the October date until the end of the year.
The secondary question, if the employer wants to setup a monthly contribution into their own accounts, does this affect how they contribute on behalf of the employees.
Permalink Submitted by mk foss on Mon, 2012-06-11 23:57
There is no Employer Match with a SEP. The employer must contribute the same percentage for each qualifying employee as he contributes for himself. So if he’s doing the 25% maximum – each employee must get 25% of salary as a SEP contribution. There are no special rules as to the timing but all contributions must be paid in by the extended due date of the businesses return. If the small business operates as a corporation – the due date is 3/15 or if the return is extended 9/15. If it’s a sole proprietorship or single member LLC – the due date is 4/15 or if extended 10/15.
My understanding is that once the employee meets the coverage requirements, the employer must contribute for them for the entire year. Denise Appleby would be the expert on that point.