Publication 590 |
2000 Tax Year |
What Is a SEP?
A simplified employee pension (SEP) is a written arrangement (a
plan) that allows an employer to make deductible contributions for the
benefit of participating employees. The contributions are made to
individual retirement arrangements (IRAs) set up for participants in
the plan. Under a SEP, traditional IRAs must be set up for each
qualifying employee (defined below). IRAs may have to be
set up for leased employees (defined below), but they do
not have to be set up for excludable employees (defined
below). Traditional IRAs set up under a SEP plan are referred to in
this publication as SEP-IRAs.
Qualifying employee.
You are a qualifying employee if you meet all of the
following conditions.
- You are at least 21 years old.
- You have worked for your employer during at least 3 of the 5
years immediately preceding the current year.
- You have received from your employer at least $450 in
compensation in the current year.
Note.
An employer can establish less restrictive participation
requirements for its employees than those listed, but not more
restrictive ones.
Leased employees.
The person or firm for whom you perform services (the recipient)
may have to include you in a SEP if you are a "leased employee"
and are treated as an employee of the recipient. A leased employee is
any person who is not an employee of the recipient and who is hired by
a leasing organization, but who performs services for another (the
recipient of the services). You are a leased employee if all
of the following apply.
- You provide services under an agreement between the
recipient and the leasing organization.
- You perform services for the recipient, or for the recipient
and related persons, on a substantially full-time basis, for a period
of at least 1 year.
- You perform services under the primary direction and control
of the recipient.
For more information on leased employees, see the discussion in
Publication 560.
Excludable employees.
You can be excluded from coverage under a SEP if you are in the
following groups of employees.
- Employees covered by a union agreement if their retirement
benefits were bargained for in good faith by their union and their
employer.
- Nonresident alien employees who have no U.S. source earned
income from their employer. For more information about nonresident
aliens, see Publication 519,
U.S. Tax Guide for Aliens.
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