Business – Grandwood Limited

Business Planning

Explore our business retirement plans for self-employed individuals and small business owners, with investment choices and specialised guidance each step of the way.

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SEP IRA

What is a SEP (Simplified Employee Pension) IRA?

A Simplified Employee Pension (SEP) IRA is a written arrangement that allows an employer to make contributions for employees’ retirement, or personal retirement if self-employed, without becoming involved in a complex retirement plan. It is typically preferred by self-employed individuals or business owners with only a few employees. A SEP is an Individual Retirement Account (IRA). If maintained for more than one person, a SEP becomes a group of IRAs. Contributions for any participant are deposited into an IRA in the name of the participant.

What are the advantages of a SEP IRA?

Ease of Use

The SEP IRA is the easiest business retirement plan to set up and maintain. A SEP IRA plan eliminates:

the administrative complexity found in many retirement plans
lengthy and detailed government reporting
numerous nondiscrimination tests; and complicated, restrictive contribution formulas associated with many retirement plans

Tax Benefits

Employer Contributions are deductible from income in the year paid or the prior year until the tax filing deadline. Similar to a Traditional IRA, the plan’s earnings are not taxed until they are withdrawn at retirement. All of the money contributed to a participant’s account immediately belongs to that person.

Flexibility of Contributions

Contributions to a SEP IRA can be very flexible. The employer is not required to make contributions on an annual basis but must contribute the same percentage for all employees. If you have earned income after the age of 70 1/2, you are still allowed to contribute.

How much can I contribute to a SEP IRA?

An employer may make an annual contributions of up to 25% of compensation, as much as $54,000 for 2017 plan year. Contributions to the business retirement plan must be made in cash. Employer contributions for each eligible employee will be the same percentage of compensation for all employees. An employer is not required to make SEP IRA contributions every year. For more information, please visit the IRS website.

Who is an eligible employee?

All eligible employees must be allowed to participate in a SEP IRA. An eligible employee is an individual who:

is at least 21 years old;
has performed “service” for the company in at least 3 of the last 5 years;
and has received at least $550 in compensation from you during the year.

You may use less restrictive requirements to determine an eligible employee.

You may exclude (a) employees covered by a union agreement whose retirement benefits were bargained for in good faith by the employees’ union and you; and (b) nonresident alien employees who have no U.S. source compensation from you. Employees who meet the plan’s eligibility requirements may not choose to be excluded from a SEP plan, and an employer must contribute for them.

Does SEP Plan participation affect IRA contributions?

Employees who participate in a SEP plan are considered “active participants” in an employer retirement plan. As such, the deductibility of their IRA contribution may or may not be affected, depending on their income. SEP retirement plan participation does not, however, reduce or eliminate an employee’s ability to fund an IRA, and all IRA earnings are tax-deferred, regardless of SEP plan participation. But more importantly, a SEP plan offers the advantage of a contribution which is potentially much larger than an IRA contribution.

SIMPLE IRA

What is the SIMPLE IRA?

SIMPLE stands for Savings Incentive Match Plan for Employees, it is a written arrangement that provides a simplified way to make contributions to provide retirement income for employer and employees. Under this individual retirement arrangement, employees may choose whether to make salary reduction contributions to the SIMPLE plan. In addition, an employer will contribute matching or nonelective contributions on behalf of eligible employees.

What are the benefits of a SIMPLE IRA?

For the employer, a SIMPLE IRA is a benefit plan that can help attract and retain valuable employees. The business retirement plan is easy to establish and administer, and there is no annual government reporting required (no annual 5500 filing). The burden of funding the plan is shared by employer and employee, and the employer may take a tax deduction for the entire amount contributed on behalf of each employee. For the employee, the self-directed SIMPLE IRA offers the ability to save more towards retirement than through an IRA. Contributions are made on a pretax basis and will accumulate tax-deferred until distributed from the plan.

What is SIMPLE IRA eligibility?

Employers are eligible to establish and maintain a SIMPLE plan only if the employer:

has no more than 100 employees (including self-employed individuals) who earned $5,000 or more in compensation during that year; and;
does not maintain another qualified retirement plan, 403(b), or SEP at the same time.

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Online trading has inherent risk due to system response and access times that may vary due to market conditions, system performance, and other factors. An investor should understand these and additional risks before trading. Carefully consider the investment objectives, risks, charges and expenses before investing. All investments involve risk and losses may exceed the principal invested. Past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. Grandwood is a discount broker that provides self-directed investors with brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice.

Options trading involves risk and is not suitable for all investors. Options trading privileges are subject to Grandwood review and approval. Please review the Characteristics and Risks of Standardised Options brochure before you begin trading options.

ETF trading involves risks. Before investing in an ETF, be sure to carefully consider the fund’s objectives, risks, charges, and expenses. Please read the prospectus carefully before investing. Leveraged and Inverse ETFs may not be suitable for long-term investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies. ETF Information and Disclosure.

Investors should consider the investment objectives, risks, and charges and expenses of a mutual fund or ETF carefully before investing. Leveraged and Inverse ETFs may not be suitable for long-term investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies. A mutual fund or ETF prospectus contains this and other information and can be obtained by emailing service@grandwood.io.

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. For more information please see Margin Disclosure Statement, Margin Agreement, and FINRA Investor Information. These disclosures contain information on our lending policies, interest charges, and the risks associated with margin accounts.

Online trades are $0 for stocks, ETFs, options and mutual funds. See our Pricing page for detailed pricing of all security types offered at Grandwood. All prices listed are subject to change without notice.

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System response and access times may vary due to market conditions, system performance, and other factors.