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taxmap/pubs/p560-000.htm#en_us_publink10008768
Publication 560

Retirement Plans 
for Small Business

rule

(SEP, SIMPLE, and 
Qualified Plans)

What's New(p1)


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In-plan Roth rollovers.(p1)

Section 402A(c)(4) of the Internal Revenue Code provides for a distribution from an individual's 401(k) plan, other than a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. An in-plan Roth rollover is not treated as a distribution for most purposes. Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I.R.B. 872, available at www.irs.gov/irb/2010-51_IRB/ar11.html.
taxmap/pubs/p560-000.htm#en_us_publink1000239223

Roth IRAs and rollovers.(p1)

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_publink1000254570

Due date of return.(p2)

The traditional April 15 due date for filing most tax returns is extended to April 18 for 2011 because of the Emancipation Day holiday in the District of Columbia – even if you do not live in the District of Columbia.
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Compensation limit remains unchanged.(p2)

For 2010 and 2011, the maximum compensation used for figuring contributions and benefits is $245,000.
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Elective deferral limits remain unchanged.(p2)

The limit on elective deferrals is $16,500 for 2010 and 2011. 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.
taxmap/pubs/p560-000.htm#en_us_publink1000121359

Catch-up contribution limits remain unchanged.(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 is $5,500 in 2010 and 2011. The catch-up contribution limitation for SIMPLE plans is $2,500 for 2010 and 2011.
The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. See "Catch-up contributions" under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information.
taxmap/pubs/p560-000.htm#en_us_publink1000135953

SIMPLE plan salary reduction contributions remain unchanged.(p2)

The limit on salary reduction contributions is $11,500 in 2010 and 2011.

Reminders(p2)


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Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.(p2)

Form 5500-SF is a simplified reporting form available to meet the filing requirements of certain small pension and welfare benefit plans. See Reporting Requirements on page 21.
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Electronic filing of Forms 5500, Annual Return/Report of Employee Benefit Plan and 5500-SF.(p2)

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, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan and www.efast.dol.gov/.
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Eligible combined plan.(p2)

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.
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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.
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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.
  1. You.
  2. A member of a controlled group that includes you.
  3. 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.
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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.
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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.

taxmap/pubs/p560-000.htm#TXMP1527dbfeIntroduction

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, 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.
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What this publication covers.(p2)

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This publication contains the information you need to understand the following topics.
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SEP plans.(p2)
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
SIMPLE plans.(p2)
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
Qualified plans.(p3)
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 2010

Type
of
Plan
Last Date for ContributionMaximum ContributionMaximum DeductionWhen To Set Up Plan
SEPDue date of employer's return (including extensions).Smaller of $49,000 or 25%1 of participant's compensation.225%1 of all participants' compensation.2Any time up to the due date of employer's return (including extensions).
SIMPLE
IRA
and
SIMPLE
401(k)
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.

Employer contribution:
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 employer's return (including extensions).4


Employer contribution:
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.

Employer Contribution:
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 PlanContributions 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 2010.
3Under a SIMPLE 401(k) plan, compensation is generally limited to $245,000 in 2010.
4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals.
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What this publication does not cover.(p3)

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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.
taxmap/pubs/p560-000.htm#en_us_publink10008792

Comments and suggestions.(p3)

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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 
Tax Forms and Publications 
SE:W:CAR:MP:T 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224


We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
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Tax questions.(p3)
If you own a business and have questions about starting a pension plan, an existing plan, or filing Form 5500, visit 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.
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Ordering forms and publications.(p3)
Visit www.irs.gov/formspubs 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 
1201 N. Mitsubishi Motorway 
Bloomington, IL 61705-6613


Note.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.