(SEP, SIMPLE, and
Waiver of required minimum distributions for 2009.(p1)
Required minimum distributions (RMDs) for 2009 are waived for defined contribution plans and IRAs, including SEP-IRAs and SIMPLE IRAs. See Distributions in chapters 2
Form 5500-SF is a new simplified reporting form available to meet the filing requirements of certain small pension and welfare benefit plans. See Reporting Requirements
on page 21.
Electronic filing of Forms 5500 and 5500-SF.(p1)
For plan years beginning on or after January 1, 2009, all Form 5500 and 5500-SF annual returns are required to be filed electronically with the Department of Labor through EFAST2. "One-participant" plans will have the option of filing Form 5500-SF electronically, if eligible, rather than filing a Form 5500-EZ on paper with the IRS. For more information, see the Instructions for Forms 5500, 5500-SF, 5500-EZ and www.efast.dol.gov/
Roth IRAs and rollovers.(p2)
Beginning in 2010, regardless of your income or filing status, you can roll over to a Roth IRA your traditional IRA, SEP-IRA, SIMPLE IRA or an eligible rollover distribution from your employer-sponsored plan. Also, a special 2-year option will apply for rollovers to Roth IRAs in 2010 only. You have the option of reporting the taxable portion of your rollover in your gross income for 2010, or reporting half in 2011 and half in 2012. For additional information on rollovers, see Publication 590, Individual Retirement Arrangements (IRAs).taxmap/pubs/p560-000.htm#en_us_publink1000240489
New eligible combined plan.(p2)
For plan years beginning after December 31, 2009, section 414(x) provides for an "eligible combined plan" which allows an employer to maintain both a defined contribution plan and a defined benefit plan on a combined basis, thus reducing the administrative burdens and costs of maintaining separate plans.taxmap/pubs/p560-000.htm#en_us_publink1000240494
Updated section 402(f) notices.(p2)
Two updated safe harbor model notices that employer plan administrators may give to recipients of eligible rollover distributions (ERDs) to satisfy section 402(f) notice requirements are contained in Notice 2009-68, 2009-39 I.R.B. 423, available at www.irs.gov/irb/2009-39_IRB/ar14.html
Compensation limit increased.(p2)
For 2009, the maximum compensation used for figuring contributions and benefits increases to $245,000. This limit remains the same in 2010.taxmap/pubs/p560-000.htm#en_us_publink1000121345
Elective deferrals increased.(p2)
The limit on elective deferrals increases to $16,500 for 2009. These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), and deferred compensation plans of state or local governments and tax-exempt organizations. This amount remains the same in 2010.taxmap/pubs/p560-000.htm#en_us_publink1000121359
Catch-up contributions increased.(p2)
A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. The catch-up contribution limitation for defined contribution plans other than SIMPLE plans increases to $5,500 in 2009. This limit remains the same in 2010. The catch-up contribution limitation for SIMPLE plans remains $2,500 for 2009 and 2010.
The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts.
- The catch-up contribution limit.
- The excess of the participant's compensation over the elective deferrals that are not catch-up contributions.
See "Catch-up contributions" under Contribution Limits
and Limit on Elective Deferrals
in chapters 3 and 4, respectively, for more information.
SIMPLE plan salary reduction contributions increased.(p2)
The limit on salary reduction contributions increases to $11,500 in 2009. The limit remains the same for 2010.taxmap/pubs/p560-000.htm#en_us_publink1000121391
Repayment of qualified disaster recovery assistance distributions.(p2)
Special rules apply to the use of retirement funds by qualified individuals who suffered an economic loss as a result of the Kansas and Midwestern disasters. While qualified distributions can no longer be made after 2009, special rules apply to the repayment of these distributions. See Publication 4492-A, Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes and Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas.taxmap/pubs/p560-000.htm#en_us_publink10008783
Credit for startup costs.(p2)
You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective.
You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. At least one participant must be a non-highly compensated employee. The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies.
- A member of a controlled group that includes you.
- A predecessor of (1) or (2).
The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year.
To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs.taxmap/pubs/p560-000.htm#en_us_publink10008785
Retirement savings contributions credit.(p2)
Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. The maximum contribution eligible for the credit is $2,000. Form 8880, Credit for Qualified Retirement Savings Contributions, and the instructions explain how to figure the amount of the credit.taxmap/pubs/p560-000.htm#en_us_publink10008786
Photographs of missing children.(p2)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication discusses retirement plans you can set up and maintain for yourself and your employees. In this publication, "you" refers to the employer. See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. This publication covers the following types of retirement plans.
- SEP (simplified employee pension) plans.
- SIMPLE (savings incentive match plan for employees) plans.
- Qualified plans (also called H.R. 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans.
SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. You can deduct contributions you make to the plan for your employees. If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. You can also deduct trustees' fees if contributions to the plan do not cover them. Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan.
Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free.taxmap/pubs/p560-000.htm#en_us_publink10008787
This publication contains the information you need to understand the following topics.
- What type of plan to set up.
- How to set up a plan.
- How much you can contribute to a plan.
- How much of your contribution is deductible.
- How to treat certain distributions.
- How to report information about the plan to the IRS and your employees.
- Basic features of SEP, SIMPLE, and qualified plans. The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1.
SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee.taxmap/pubs/p560-000.htm#en_us_publink10008789
Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. In addition, you will contribute matching or nonelective contributions. The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan.taxmap/pubs/p560-000.htm#en_us_publink10008790
The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases.
Table 1. Key Retirement Plan Rules for 2009
| Last Date for Contribution || Maximum Contribution || Maximum Deduction || When To Set Up Plan |
| SEP ||Due date of employer's return (including extensions).||Smaller of $49,000 or 25%1 of participant's compensation.2 ||25%1 of all participants' compensation.2 ||Any time up to the due date of employer's return (including extensions).|
| Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made.4 |
Matching or nonelective contributions: Due date of employer's return (including extensions).
| Employee contribution: Salary reduction contribution up to $11,500, $14,000 if age 50 or over.|
Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation.2
|Same as maximum contribution.||Any time between 1/1 and 10/1 of the calendar year.|
For a new employer coming into existence after 10/1, as soon as administratively feasible.
| Qualified Plan: Defined Contribution Plan || |
Elective deferral: Due date of employee's return (including extensions).4
Money Purchase or Profit-Sharing: Due date of employer's return (including extensions).
Employee contribution: Elective deferral up to $16,500, $22,000 if age 50 or over.
Money Purchase: Smaller of $49,000 or 100%1 of participant's compensation.2
Profit-Sharing: Smaller of $49,000 or 100%1 of participant's compensation.2
25%1 of all participants' compensation2, plus amount of elective deferrals made.
|By the end of the tax year.|
| Qualified Plan: Defined Benefit Plan ||Contributions must be paid in quarterly installments depending on the plan year, due 15 days after the end of each quarter. See Minimum Funding Requirement in chapter 4.||Amount needed to provide an annual benefit no larger than the smaller of $195,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years.||Based on actuarial assumptions and computations.||By the end of the tax year.|
| 1Net earnings from self-employment must take the contribution into account. See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 .|
2Compensation is generally limited to $245,000 in 2009.
3Under a SIMPLE 401(k) plan, compensation is generally limited to $245,000 in 2009.
4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals.
Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. You may also need professional help and guidance.
Also, this publication does not cover all the rules that may be of interest to employees. For example, it does not cover the following topics.
- The comprehensive IRA rules an employee needs to know. These rules are covered in Publication 590.
- The comprehensive rules that apply to distributions from retirement plans. These rules are covered in Publication 575, Pension and Annuity Income.
- The comprehensive rules that apply to section 403(b) plans. These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans).
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
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If you own a business and have questions about starting a pension plan, an existing plan, or filing Form 5500, Annual Return/Report of Employee Benefit Plan, visit www.irs.gov
or call our Tax Exempt/Government Entities Customer Account Services at 1-877-829-5500. Assistance is available Monday through Friday. If you have questions about a traditional or Roth IRA or any individual income tax issues, you should call 1-800-829-1040. We cannot answer tax questions at the address listed above.
to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.
Internal Revenue Service
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All references to "section" in the following discussions are to sections of the Internal Revenue Code (which can be found at most libraries) unless otherwise indicated.