Simplified Employee Pension plans (SEPs)
Simplified Employee Pension plans (SEPs) are pension plans designed for self-employed individuals and small businesses. With these plans, there are few requirements to file with the IRS. SEPs allow an employer to make sizable contributions to employees that are tax deductible to the employer and can be excluded an from employee’s gross income.
The 2015 maximum contribution level is up to a $53,000 maximum or 25% of income (20% for self-employed income). Full contributions can be made in profitable years, and cut back in others.
You must begin taking distributions from a SEP IRA by April 15th of the following year after you reach the age of 70 ½. After that you must take your distributions by the end of each calendar year (Dec. 31st). Distributions are based on the value of your account and life expectancy. You can take the required amount from each of your IRA accounts, or you can take the required amount out of just one account, provided the overall distribution amount is correct. If you do not take your required distribution the IRS will impose penalties – which can be substantial. However you can always take more than the minimum required.