June 19, 2011. Paul Hixon
The United States has indeed a number of options when it comes to retirement plans. There’s the 401k, which you can rollover if you decide to change employers or companies.
There’s also the SEP IRA, which is common among small businesses. The SEP IRA, or Simplified Employee Pension Individual Retirement Account can either be established for the employer alone, or for both employees and employer. Just like the 401k, a SEP IRA is an assurance that one would be receiving money when he or she retires.
HOW DOES IT WORK?
The employer and the eligible employees will have separate SEP IRA accounts, but all of the contributions will be paid by the employer. The percentage of the contributions will be equal for all, but the employer can adjust the contribution annualy depending on the business‘ profits.
HOW WILL THE EMPLOYER BENEFIT?
This kind of retirement plan is quite expensive for the employer, seeing that he will be paying for the eligible employees’ accounts. Some employers think they will not benefit from this, but they’re actually wrong. I’ve been an employee myself, and nothing inspires me more than knowing that my employer cares for my welfare. I’m not the only one. In fact, almost all employees think the same. Getting a retirement plan for your employees will create loyalty, and would therefore drive them to work harder.
WHICH EMPLOYEES ARE ELIGIBLE?
There are certain criteria that needs to be met in order for an employee to be eligible for this retirement plan. First, one should be at least 21 years old. They should also be working for at least three years for the employer for the last five years. Lastly, they should be earning at least $450 from this employer within the year. Part- time and seasonal employees can also be enrolled in the program, provided that they’ve met all the requirements. Small businesses with family members as employers are also eligible for a SEP IRA, be it a wife; kids or siblings.
Updated June 19, 2011. Published January 13, 2011. Paul Hixon
