As of 2015, self-employed individuals must be at least 21 years old, have earned no less than $550 in a year from an employer, and have worked for a company for at least three to five years to participate in a simplified employee pension individual retirement account plan. Companies that offer self-employed individuals this type of retirement plan may have less restrictive requirements, such as lowering the age of eligibility, but they may not have more stringent provisions, notes IRS.gov. In addition to employee requirements, companies must meet certain conditions when implementing a SEP IRA.Continue Reading
For all organizations, SEP IRA requirements are the same for all individuals, including administrative assistants and company owners, states IRS.gov. Just as people must meet qualifying criteria to participate in an IRA plan, some employees are eligible for disqualification. Disqualifying criteria include employees covered by union labor retirement plans and workers who are not legal citizens of the United States.
When establishing a SEP IRA, companies follow three steps as of 2015. The first step is to create a written contract for all employees with a SEP plan. To do so, companies generally use Form 5305-SEP, which is administered by the IRS. The next step is to educate employees on the provisions of the SEP plan, such as making a copy of the agreement or providing written program information. Lastly, companies must establish SEP plans for all eligible employees or risk disqualification from the IRS.Learn more about Financial Planning