You must contribute for each employee eligible to participate in your SEP, even if they are over 70 and a half years old. However, the employee must also accept minimum distributions. If you don't meet this criteria, your employer can still choose to contribute to a Top Gold IRA or SEP IRA on your behalf, provided that the employer's least restrictive policies apply equally to all employees and also to the employer. Employers can contribute to Top Gold IRAs or SEP IRAs for employees under 21, who don't comply with the 3-of-5 rule, or who earn less than the dollar threshold. The only requirement is that the same eligibility rules apply to everyone equally.
You don't have to contribute to an SEP every year. However, when you make contributions, you must make them for all eligible employees. You must also make a contribution even for a participant who is not employed on the last day of the year. An SEP cannot have an employment requirement for the last day of the year.
In addition, if an employee is over 70 and a half years old, they should still receive contributions if eligible. They will also hold retreats at that time. An employer offering an SEP IRA must contribute a uniform amount, based on the percentage of salary, both to their own SEP IRA and to the SEP IRAs of each eligible employee. If you are an employee covered by an SEP IRA, employer contributions don't reduce the amount you can contribute to an IRA for you, but the amount of your traditional IRA contribution that you can deduct may be reduced to certain higher income levels, due to the combination of the two plans.
If you exceed income limits and don't qualify for a traditional IRA deduction, you can transfer funds from your traditional IRA to a Roth IRA using the clandestine Roth method. They just have different types of tax advantages, and IRAs with SEP may be more suitable for companies with several employees. An SEP IRA is a tax-deferred account, meaning that, as with a traditional IRA, contributions are made with pre-tax dollars and withdrawals are taxed as ordinary income. These contributions may limit the amount of the regular IRA contribution you can deduct on your income tax return, as well as the amount you can contribute to other IRAs, such as a Roth IRA.
If you work for a company that offers an SEP IRA, your employer must make the same contribution, as a percentage of salary, to your SEP IRA and SEP IRAs as any other eligible employee. Only the company can contribute to an SEP IRA and must make proportionate contributions to all full-time workers. The government imposes no restrictions on contributing to both an SEP IRA and a traditional IRA in the same year. The main difference between a SIMPLE IRA and an SEP IRA is that only employers can contribute to SEP IRAs, but employees can contribute to SIMPLE IRAs with their paycheck through elective deferrals.
