Insights

The IRS emphasizes the importance of annually reviewing the operating requirements for a company’s retirement plan. They have designed checklists specifically for this purpose: Publication 4284 for Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs and Publication 4285 for Simplified Employee Pensions (SEPs). Both checklists have recently been revised to reflect 2018 indexed limits.

A SIMPLE IRA is a retirement plan available to small employers. SIMPLE IRAs require an employer contribution, and both employer and employee contributions are made to an individual retirement account (IRA) or annuity set up for each employee. The checklist reminds employers of the relevant operating requirements including:

• They cannot have more than 100 employees who earned at least $5,000 in the previous year.
• They cannot sponsor another type of retirement plan in addition to the SIMPLE IRA.
• The required employer contribution is either two percent of the employee’s compensation or a three percent matching contribution.
• Employee deferrals must be deposited as soon as possible but no later than 30 days following the months in which the employee would have otherwise received the money.

A SEP is a plan in which all eligible employees are permitted to participate, including part-time employees. Contributions are deposited to IRAs for each employee. The checklist reminds employers of the relevant operating requirements including:

• Employees of related businesses must be included in plan participation.
• Employer contributions to a SEP must be the same percentage of compensation for each employee.
• All contributions are limited to the lesser of 25 percent of compensation or $55,000 (for 2018).

Publication 4284, SIMPLE IRA Plan Checklist »
Publication 4285, SEP Checklist »