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SARSEP

A SARSEP  Salary Reduction Simplified Employee Pension plan  is a SEP set up before 1997 that allows employees to elect to defer a part of their salaries into the plan.  Because this is a simplified plan, the administrative costs should be lower than for other, more complex plans.  Under a SARSEP, employees and employers make contributions to traditional Individual Retirement Arrangements (IRAs) set up for employees, subject to certain percentage-of-pay and dollar limits.

To have a SARSEP :

• You must have established the SARSEP before 1997.
  
  

• At least 50% of your employees eligible to participate must choose to make employee elective deferrals for the year.
  
  

• You must have no more than 25 employees who were eligible to participate in the SARSEP at any time during the preceding year.

You are not allowed to set up a SARSEP after 1996. However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have employee elective deferrals made to their SEP-IRA. If you are interested in setting up a retirement plan that permits employee elective deferrals, see SIMPLE IRA plans.
 
A SARSEP has a life cycle with four distinct stages. This page offers a basic understanding of the life cycle of a SARSEP.

• Choosing a SARSEP

• Establishing a SARSEP

• Operating a SARSEP

• Terminating a SARSEP

See the SARSEP Resource Library for forms, publications, frequently asked questions, etc.

Comparison of older SARSEP vs. newer SIMPLE Plan - Click Here

This information is provided for review and consideration. Please consult legal advisors for practical advice for business and personal financial situations.