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Requirements
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SIMPLE IRA PLAN
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SAR-SEP
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Eligible employers
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100-employee rule must
be satisfied
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No more than 25
eligible employees
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Document
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Form 5305-SIMPLE or
Form 5304-SIMPLE, prototype or individually-drafted
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Form 5305A-SEP,
prototype or individually-designed
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Effective date
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No earlier than
January 1, 1997. New SIMPLE-IRA plans may be effective on date other than
January 1, but generally not later than October 1 of a calendar year
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Must have been
executed by December 31, 1996, to continue beyond 1996
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Eligible employees
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$5,000 of compensation
in 2 prior years, and expected to receive $5,000 in current year
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Service with the
employer in at least 3 of the last 5 years
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Exclusive plan
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Yes
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No
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Related employer rules
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Apply
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Same
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Coverage testing
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Not applicable
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Same
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Elective contributions
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Limited to $60,00 per
calendar year; 60-day election period prior to beginning of year (but
additional election periods permitted)
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Limited by section
402(g) limit and by section 415 limits
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Matching contributions
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Capped at 3% of
compensation (may be reduced down to 1% cap in 2 of 5 years)
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Not permitted
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Nonelective
contribution
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2% of compensation,
but can only be made instead of matching contributions
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Employer discretionary
contribution permitted, but not required (except to the extent required to
satisfy top heavy)
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Nondiscrimination
tests
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Not applicable
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Each HCE's elective
deferrals for the year cannot exceed
1.25 times the average of the deferral percentages of the eligible NHCs
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Vesting
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All contributions 100%
vested
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Same
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Top heavy rules
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Not applicable
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Applicable
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Section 415 limits
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Not applicable
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Applicable
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Percentage of
compensation limit on contributions
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None on total contributions.
Matching contributions and nonelective contributions are limited by status to
a specific percentage of compensations
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Total of employer's
SEP contributions, if any, plus employee's salary reduction contributions to
SARSEP limited to 15% of compensation
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Compensation dollar
limit
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Only applies to
nonelective contributions
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Applies to employer's
discretionary SEP contributions, if any
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Section 402(g) limit
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Applies
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Same
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Employer deduction
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No 15% deduction limit
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15% deduction limit
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Form 5500 filing
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No
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Same
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Trust accounting
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Not applicable
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Same
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Withdrawals
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Permitted anytime; 25%
tax penalty applies if employee is under 59-1/2 and withdrawal is in first 2
years
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Same as SIMPLE-IRA,
except no 25% penalty
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Minimum distributions
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Permitted anytime; 25%
tax penalty applies if employee is under age 59-1/2 and withdrawal is in fir
2 years
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Same as SIMPLE-IRA,
except no 25% penalty
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Minimum distributions
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Must start by April 1
of year following calendar year in which age 70-1/2 attained
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Same
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Rollovers
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Only into another
SIMPLE-IRA or other IRA (including a SEP-IRA)
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Into SEP-IRA or other
IRA (but not to SIMPLE-IRA) (Section VI, Part B)
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Joint and survivor
rules
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Not applicable
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Same
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Tax exempt
organization
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May maintain if
100-employee test is satisfied
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May maintain only if
arrangement was grand fathered under TRA '86 (i.e., established by July 1,
1986)
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Governmental employer
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May maintain if
100-employee test is satisfied
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May maintain only if
arrangement was grand fathered under TRA '86 (i.e., established by July 1,
1986)
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Plan year
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Must be calendar year
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Must be either
calendar year or the employer's taxable year
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