of all eligible participants, including employees who die or terminate
employment before the contributions are made. Also, contribution to SEP
accounts are always 100 percent vested or owned by the employee.
Employer contributions to a SEP must be made by the due date, including any
extensions, for filing your federal income tax return for that year. Once you
send the SEP contributions to each eligible employee's IRA, that employee
makes all the investment decisions for his or her own account. SEP
contributions can be invested in stocks, mutual funds, money market funds,
savings accounts, and other similar types of investments. Employees can
move their SEP IRA assets from one traditional IRA to another.
Employees could take a distribution from their SEP IRA at any time.
Withdrawals are taxable in the year received. If the participant makes a
withdrawal before age 59.5, there is a 10 percent additional tax that generally
applies. We do have a publication on our website – it's Publication 5036 – that
provides a list of the exceptions to that 10 percent additional tax on early
distributions. I advise you to go there to look at that to see if any exceptions
apply.
I know the financial institutions my parents use are on top of the required
minimum distribution rolls, sometimes referred to as RMD rolls. And they do
make certain the required minimums are distributed to them. However, on our
examinations, we do see where these RMD payments are not made. If you do
not take the minimum distribution required, you may have to pay a 50, five-
zero, excise tax on the amount distributed as required. And trust me, nobody
wants to deal with that tax. So we suggest that you work with your financial
institution to ensure these distributions are made as required.
SEP contributions and earnings may be rolled over tax-free to other IRAs and
retirement plans. Our website has another tool. It's a rollover chart. It doesn't
have a publication number. I suggest on our homepage, go into the search
engine and type in "rollover chart," and it will be the first thing that shows up.
And it helps you determine whether you can roll over amounts from your SEP
IRA and the plan types where the SEP IRA can receive a rollover. Participant
loans are never permitted in SEP plans. But contributions can still be made for
the employees that have reached age 70.5 .
Again, here is some filing and notice requirements and tips. Remember, the
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