re: SEP IRA

I am an employer with a SEP IRA. I write a check for each employee and deposit it with the financial institution which handles the SEP. The financial institution will set up the individual with an account. From there all I need is their account number. Once the check clears its no longer my business.

It is great to have if the company is a success, and gives the employee incentive to make it a success. It is liked by employees because they can get way more $ per year then by contributing on their own and an employer match to a 401K. I think the max contribution a year is $66,000, and goes up to $69K next year.

You are not obligated to fund the SEP each year, but you won't get the benefits either as every employee gets either a max 25% payout or $66,000. What I do it set up my salary to max out the $66K using the 25% method. Otherwise I would have to pay each employee $66K including the janitor. The contributions need to be even for everyone.

It has not happened yet, but I reiterate every year that this should never be expected, but it is in our best interest to pay into the SEP to save on taxes, and maintain morale. It gives them motivation to make the company better.