SIMPLES (don't let
the name fool you)....... vs.....SEPs (what's
with that name any way?)
| FEATURES | SIMPLE IRA | SIMPLE 401(k) | SEP |
| General Description | Both Employee deferrals and required Employer contributions | Both Employee deferrals and required Employer contributions | Employer funded. The contribution is flexible each year |
| Eligible Employers | Employ
less than 100 employees who were paid at least $5,000. Employer may not maintain another plan in the same calendar year |
Employ
less than 100 employees who were paid at least $5,000. Employer may not maintain another plan in the same calendar year |
Any Employer. SAR/SEPs may not be established after 12/31/96 & sponsors w/existing plans cannot have over 25 eligible employees |
| Employee Contribution/ deferral limits | Employee
Deferrals: lesser of:
Year Limit 2002 $7,000 2003 8,000 2004 9,000 2005 10,000 . or.. 100% of salary |
Employee Deferrals: lesser of: Year Limit 2002 $7,000 2003 8,000 2004 9,000 2005 10,000 .. or.. $40,000 (EE & ER combined eff. 2002year) |
No Employee Contributions. Each individual's Ctb limited to the lesser of 20% of gross salary or $35,000 (2001 limit-up from $30,000) |
| Employer Contribution requirements/ limits | a 100% match on employee deferrals up to 3% of pay…or …2% of pay for all eligible employees | a
100% match on employee deferrals up to 3% of pay…or …2% of pay for all eligible
employees. Overall deduction limited to 15% of compensation |
Top Heavy
Minimums required for Top Heavy Plans
|
| Participant Eligibility Requirements | All employees who earned at least $5,000 in the 2 preceding plan years and current year | All employees who earned at least $5,000 in the 2 preceding plan years and current year | Earned
minimum wages in 3 of the past 5 years ($400 for 1999) Age 21 |
| Vesting | 100% immediately | 100% immediately | 100% immediately |
| In Service Withdrawals/Loans | Withdrawals in the first 2 years are subject to a 25% penalty (under age 59 ½) plus income taxes. No IRA rollovers before 2 years. No Loans | Must meet hardship requirements and are subject to a 10% penalty (under age 59 ½) plus income tax. Loans allowed to non shareholder/ owner employees | Immediately accessible and subject to a 10% penalty if you are under age 59 ½ plus income tax. No Loans |
| IRS Reporting, disclosure, ADP Testing, Top Heavy | No IRS Filings. 60 days participant notice prior to beginning of each plan year. No ADP or Top Heavy Tests | Full IRS reporting & bonding. Annual participant reports. No ADP or Top Heavy Tests | Minimal IRS Filings. Provide basic info to employees at Plan establishment. ADP test for SAR/SEPS and Top Heavy Tests for all SEPS |
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