SIMPLE, SEP, and SARSEP Answer Book, Eighteenth Edition

SIMPLE, SEP, and SARSEP Answer Book provides up-to-date coverage of recent legislative and regulatory developments in simplified employee pension (SEP) plans and savings incentive match plans for employees (SIMPLEs). It provides clear and concise guidance on the complex design, administration, and compliance issues that arise in connection with SIMPLEs, SEPs, and salary reduction SEPs (SARSEPs).

Highlights of SIMPLE, SEP, and SARSEP Answer Book, Eighteenth Edition , include:

• Discussion of the final exemption procedure from the prohibited transaction rules that apply after December 26, 2011
• How to compute the compensation a self-employed individual needs to be allocated the maximum amount ($50,000) for 2012
• Why the Code Section 164(f) deduction for half of the self-employment taxes will be close to, but not equal to half, of the self-employment tax shown on Schedule C of Form 1040 or Form 1040NR for 2011 and 2012
• The statutory changes under GOZA, TIPRA, HERO, PPA, HEART, and WRERA relating to qualification of IRAs that became effective after the mandatory amendments were announced in 2002
• How the deduction for one-half of the self-employed health insurance (SEHI) was treated when calculating one-half of the self-employment tax under Code Section 164(f) for 2011 and 2010
• When a person providing investment advice becomes a fiduciary under the proposed fiduciary advice regulations issued in 2010
• What an Employer Plans Compliance Unit (EPCU) examination program request involving a SIMPLE or SEP is looking for and how to respond
• How a prototype traditional IRA, SEP-IRA, or SIMPLE IRA may be amended to incorporate statutory changes without affecting reliance on a favorable opinion letter
• How the designated Roth account (DRA) rules apply to a 401(k) SIMPLE IRA plan
• And much more!

• 1. Overview: SEPs and SARSEPs
  • Highly Compensated Employees
  • Establishment
  • Termination
  • Qualified Status
  • Compliance
  • Pros and Cons
  • Legislation
• 2. SEP Establishment and Employer Qualification
  • Establishing SEPs
  • Establishing SARSEPs
  • SEP Establishment Dates
  • Employee Eligibility
  • Employees of Limited Liability Partnerships and Limited Liability Companies
  • Forcing Employees to Participate
  • Classification of Employees
  • Employees of Predecessor Employers
  • Repeal and Grandfathering of SARSEPs
  • Examination Guidelines
• 3. SEP and SARSEP Documents
  • Model SEP and SARSEP Plan Documents
  • Prototype Document Approval
  • Individually Designed SEPs
  • Approval for Combined Plans and Prior Plans
• 4. ERISA Considerations and Related Laws
  • Alternative Reporting Methods
  • Disclosure Requirements When Not Using Form 5305-SEP
  • Prohibited Transactions and Related Definitions
  • Exemptions for Investment Advice
  • Exemption for Transactions with Service Providers
  • Other Prohibited Transaction Exemptions
  • Payroll Deduction IRA
  • Use of Electronic Media
  • Forwarding Contributions
  • Federal Securities Laws
  • Option Securities and Margin Accounts
  • Impact of State and Local Laws
  • Automatic Rollover of Mandatory Distributions
  • Bonding
  • FDIC Coverage
• 5. Making Contributions and Taking Distributions: SEPs and SARSEPs
  • Making Contributions to SEPs and SARSEPs
  • SEPs with Other Plans and Annual IRAs
  • Distributions and Deemed Distributions
  • Excess Contributions
  • Traditional IRA Excess Reporting Requirements
  • USERRA
• 6. Compensation for SEPs and SARSEPs
  • Defining Compensation
  • Compensation Limits
  • Multiemployer and Multiple-Employer Plans
• 7. Special Rules for Self-Employed Individuals
  • Earned Income as Compensation
  • Calculating Earned Income
  • Self-Employment Tax
  • Earned Income: Where to Start
  • “Ultra Net” Earned Income
  • Interests in Multiple Entities
• 8. Top-Heavy Plans Benefiting Key Employees: SEPs and SARSEPs
  • Minimum Required Contribution
  • Key Employees
  • Determining Top-Heavy Status
  • Treatment of Various Plans
• 9. Integration of Contributions with Social Security
  • Allocating Integrated Contributions
  • Related Integration Rules
  • Disclosure Rules
• 10. Deduction of SEP Contributions by Employer
  • Conditions for Deduction
  • Fees and Commissions
  • Elective Salary Reduction Contributions
  • Affiliated Service Group Member
  • Deduction in Future Years
  • Penalty
  • Reporting
• 11. Taxation of SEP Contributions
  • Percentage Exclusion Limit
  • Dollar Exclusion Limit
  • Reporting
  • Overall Limit
  • FICA, FUTA, and Other Taxes
• 12. ElectiveSARSEP Deferrals
  • Elective Salary Reduction Deferrals
  • Excess Amounts Unique to SARSEPs
  • Excess Deferrals - Exceeding Deferral Dollar Limit
  • Excess SEP Contributions - Failing the 125 Percent Nondiscrimination Test
  • Disallowed Deferrals - Failing the 50 Percent Participation Rate Requirement
  • Catch-up Contributions
• 13. IRS Disclosure, Filings, Penalties, and Tax Withholding Disclosure
  • Revocation Period
  • Reports to the IRS and the IRA Owner
  • Taxpayer Reporting
  • Withholding
  • Reporting Penalties
  • Reporting Form 5329 Penalties on Form 1040
  • Excess Distributions and Excess Accumulations
  • Calculating and Reporting Nondeductible Contributions on Form 8606
  • Filing Information and Requirements
  • IRS Form 990-T
  • IRS Form 1040
  • IRS Form 1099-R
  • IRS Form 5329
  • IRS Form 5330
  • IRS Form 5498
  • Magnetic Media Filing Requirements
  • IRS Form 5500
  • IRS Form W-2
  • Other Filings and Registrations
• 14. SIMPLE IRA Arrangements
  • Basic Concepts
  • Establishing a SIMPLE IRA Plan
  • Prototype SIMPLE IRAs and SIMPLE IRA Plans
  • Employer Eligibility
  • Employee Eligibility
  • Compensation
  • Contributions
  • Employee Elections
  • Vesting Requirements
  • Employer Notification and Administrative Requirements
  • Trustee Administrative Requirements
  • Tax Treatment of SIMPLE IRAs
  • Designated Financial Institutions
  • Fiduciary Responsibility
  • Miscellaneous Rules
  • Remedial Correction Programs
  • Excess Contributions
  • Tax Credits
• 15. 401(k) SIMPLE Plans
  • Vesting Requirements
  • Employer Eligibility
  • Exclusive Plan Requirement
  • Employee Eligibility
  • Compensation
  • Contributions
  • Discrimination Testing
  • Tax Treatment of Contributions
  • Distributions
  • Rollovers and Transfers
  • Notice and Reporting Requirements
  • Adopting a 401(k) SIMPLE Plan
  • Excess Contributions and Plan Deficiencies
  • Termination in Favor of a SIMPLE IRA
  • Tax Credits
• 16. Beneficiary Designations and Estate Planning
  • About Beneficiary Designations
  • Substantial Compliance
  • Lost Beneficiary Designation
  • Default Beneficiary Designation
  • Laws and External Documents That Might Affect a Beneficiary Designation
  • Using Trusts
  • Pets
  • Charitable Gifts
  • Simultaneous Death; Absentees
  • Family Rights That Restrain a Beneficiary Designation
  • Marriage
  • Spouse's Rights
  • Premarital Agreements
  • Marital Agreements
  • Tenancy by the Entirety
  • Disclaimers
  • Tax-Oriented Estate Planning
  • Giving Advice
• 17. Correction Programs
  • IRS Correction Program
  • DOL Correction Program
• APPENDIX A: Sample Forms
  • SEP, SARSEP Deferral Form
  • Model Notificationto Eligible Employees (SIMPLE IRA Plan) Model Salary Reduction Agreement (SIMPLE IRA Plan)
  • Sample Summary Description (SIMPLE IRA Plan)
  • Sample Summary Description for Non-Designated Financial Institution (SIMPLE IRA Plan)
• APPENDIX B: Sample Notices
  • Notification of Excess SEP Contributions (HCE deferral percentage limitation exceeded)
  • Notification of Disallowed Deferrals (50 percent participation rate requirement not met)
  • Notification of Excess Deferrals ($17,000/$22,500 elective deferral limits exceeded)
  • Sample Return of Excess Form Request to Return Employer/Employee Contributions (For SIMPLE IRA Plans Under IRS EPCRS Procedure)
• APPENDIX C: Sample Simplified Employee Pension Allocation Formula Notices
  • Alternative 1 (nonintegrated or model SEP)
  • Alternative 2 (integrated SEP, contribution expressed as a formula)
• APPENDIX D: Revenue Procedure 2008-50
• APPENDIX E: Comparison of 401(k) Plans and Grandfathered SEP/SARSEP Plans for 2012
• APPENDIX F: Ten-Year Income Averaging Taxation
• APPENDIX G: Employee Benefit Limits
• APPENDIX H: Illustrations of Selected Examples
• APPENDIX I: IRS Legal Memoranda, General Counsel Memorandum, and Private Letter Rulings
  • IRS Legal Memorandum
  • General Counsel Memorandum
  • Private Letter Rulings
• APPENDIX J: Department of Labor Letters
  • DOL Adv. Opinion 2006-09A - Code Section 4975(c)(1)(A) & (B)
  • DOL Adv. Opinion 2006-01A - DOL Reg. Section 2509.75-2
  • DOL Adv. Opinion 2005-23A - ERISA Section 3(21)
  • DOL Opinion 82-3A - ERISA Section 110
• APPENDIX K: Sample Request Form
• APPENDIX L: Chart of Contribution Revocations and CIP Failures
• APPENDIX M: Excess Elective SEP/SARSEP Contributions for 2012
• APPENDIX N: 2012 Comparison Chart for SIMPLE in IRA Form Versus SIMPLE 401(k)
• APPENDIX O: Comparison of Elective Deferral Plans for 2012
• TABLES
  • Internal Revenue Code Sections
  • Treasury Regulations Sections
  • ERISA Sections
  • Revenue Procedures and Revenue Rulings
  • IRS Notices, Announcements, and Letter Rulings
  • Department of Labor Regulations and Advisory Opinions
  • Code of Federal Regulations
  • United States Code
  • Pension Protection Act of 2006
  • Cases