Small Business Plans

SEP IRA

• Any employer, including a sole proprietor with no employees, can establish a SEP for the benefit of all eligible employees.
• The owner of the business is also considered an employee who is eligible to receive a SEP contribution.
• Up to the lesser of 25 percent of compensation or $41,000 can be deposited annually for an eligible employee (or such other amount provided by law).
• An eligible employee who receives a SEP contribution can also make an annual IRA contribution of the lesser of 100 percent of earned income up to $3,000 in 2004 and $4,000 for 2005-2007.
• A SEP IRA may be opened and funded up until the employer’s tax filing deadline, including extensions.

Click here to open a SEP IRA

SIMPLE IRA

• Employers are eligible to establish and maintain a SIMPLE IRA plan only if you employed 100 or fewer employees last year that earned $5,000 or more in compensation from you during the year.
• You may not maintain any other qualified retirement plan in which your employees currently accrue benefits.

Click here to open a SIMPLE IRA

Contributions:
Employee Salary Deferral Contributions

• Employees may contribute up to: $9,000 in 2004 and $10,000 in 2005. In 2006, increases will be based cost of living adjustments.
• Eligible individuals over age 50 may make catch up contributions of up to: $1,500 in 2004, $2,000 in 2005 and $2,500 in 2006. In 2007, catch up contributions will be based on cost of living adjustments.
• Contact your Tax Advisor for additional details.

Employer SIMPLE Contributions
Employers are required to make contributions to the SIMPLE IRA account of all employees by using one of the following contribution formulas:

• Match each eligible employee’s contribution dollar-for-dollar up to 3% of the employee’s compensation; or,
• Elect to make a matching contribution of up to 3% of compensation in any two of the last five calendar years, including the year the match is reduced. The reduction may not be less than 1% of each employee’s compensation; or,
• In any calendar year, the matching contribution may be replaced with a 2% contribution to all employees. This is called a non-elective contribution and must be made to all eligible employees regardless of whether or not they contribute through salary deferrals.

NOTE: As a discount broker, Trading Direct does not provide advice as to security selection. Taking into consideration the factors of time horizon, investment objectives, and risk tolerance, it is up to the individual to select his/her own investments, which he/she believes will generate sufficient returns.