Simplified Employee Pension (SEP) Plans

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If you’re self-employed or have a new business with variable profits, consider opening a Simplified Employee Pension (SEP) plan for you and your employees. A SEP is inexpensive to establish and maintain, and since employer contributions are not mandatory, you can vary your retirement contributions each year.

  • Offers the simplicity of an IRA with much higher contribution limits
  • Reduces the administrative burden, with few paperwork requirements and no start-up or administrative expenses
  • Provides valuable tax advantages for you and your employees

SEP Plan Features

Plan description

Merrill Lynch’s SEP plan is a cost-effective, tax-favored retirement program for self-employed individuals and small business owners. It allows employers to make contributions to traditional individual retirement accounts (SEP/IRAs) maintained by employees.

Plan type

IRA-based.

Participant eligibility

Employees age 21 and older who have earned at least $500 (indexed for inflation by the IRS) during the year and who have performed services for you in at least three of the past five years. (You can establish less restrictive eligibility requirements, if you choose.)

Employer contribution

Employer contributions are discretionary – you choose how often and how much to contribute. For 2007, you can contribute the lesser of 25% of compensation (up to $225,000) or $45,000 for yourself and each eligible employee.

Employee contribution

Employee contributions are not permitted in SEPs.

Frequently Asked Questions About SEP Plans

Why would a SEP be right for my business?

With a SEP, you can choose how much and when to contribute – you are not locked in. Additionally, with a SEP, you do not have an annual requirement of filing of IRS Form 5500, as you do with other plan types. Therefore, by establishing a SEP, you get contribution flexibility with minimal administration and paperwork.

What tax advantages will I receive?

Employer contributions are generally tax-deductible as a business expense. Additionally, if eligible, you may take a nonrefundable income tax credit for 50% of the first $1,000 of administrative and retirement education expenses you may incur in each of the program’s first three years.

Are employers responsible for employees’ SEP investment choices?

No. Employees select and control their own investments.

Is there a vesting schedule for contributions?

All contributions are 100% vested immediately.

What is the deadline for establishing a SEP?

You can establish a SEP and make employer contributions up to your tax-filing deadline, including extensions.

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For more information call 1.866.4MLBUSINESS (465-2874) or e-mail us at AskMLBiz@ml.com.

Merrill Lynch, Pierce, Fenner & Smith Incorporated is a registered broker-dealer, not a bank, and the WCMA account is not a bank account. Banking services are provided by licensed banks or by third parties through arrangements with licensed banks. Unless otherwise indicated, investment products are not FDIC-insured, not guaranteed by a bank and may lose value.

Working Capital Management Account and WCMA are registered service marks of Merrill Lynch & Co., Inc.

SEP Plus is a registered service mark of Merrill Lynch & Co., Inc.

Total Merrill is a service mark of Merrill Lynch & Co., Inc.

Neither Merrill Lynch nor its representatives provide legal or tax advice. You should consult with your own legal/tax advisor regarding your particular situation.

* Additional fees for these services may apply.