Expert: Ed McFarland - 8/28/2006

Question
"Hello.  I work for a company that has a SEP-IRA plan.  Each employee must set up their SEP account and then turn in their account information so that I can send a check to the financial institution of their choice.  What happens if an employee does no participate (or they no longer work for us, but they still qualify for a contribution)?  Can I open an account on their behaf?  

Thank you,
Teresa"


Answer
Yes you will open an account on there behalf, given what you have set for requirments for the plan. You pick the trustee for aSEP-IRA. If the employees are picking the plan, it is not a SEP but rather a SIMPLE IRA.

You do not have to make contributions every year.  When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed work for your business during the year for which the contributions are made, even employees who die or terminate employment before the contributions are made. Contributions for all employees generally must be uniform—for example, the same percentage of contributions.

You should bookmark the information at the following:

www.dol.gov/ebsa - Click on “Compliance Assistance for Small Employers” and on “Publications/Reports” for information you and your employees can use.

www.irs.gov/ep - Click on “Information for Plan Sponsor/Employer.” This Web site is filled with plain-language information that will help you maintain your SEP properly. All the IRS forms and publications mentioned in this booklet are available here.