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SEP Plan Fix-It Guide

Mistake

Find the Mistake

Fix the Mistake

Avoid the Mistake


1) You haven't updated your SEP plan document for current law
(More)
 

Determine if your Form 5305-SEP is the current revision (December 2004)

Adopt revised Form 5305-SEP

Maintain regular contact with the company that sold you the plan

2) Employees of related businesses were excluded from participating
(More)

Identify any companies that you own or with which you have a financial relationship

Apply reasonable correction method that would place affected employees in the position they would've been in if there were no operational plan mistakes

Determine if you own any other businesses

3) Eligible employees were excluded from participating
(More)

Review eligibility and participation plan document sections. Check when employees are entering the plan

Corrective contribution that would place affected employees in the position they would've been in if there were no operational plan mistakes

Review the participation status of all employees at least once a year

4) Contributions to participants’ SEP-IRAs were miscalculated because the wrong definition of compensation was used
(More)

Review the SEP plan document to determine if you’re using the proper compensation for allocations
 

Correction is based on the terms of the plan in effect at the time of the mistake
 

Review the SEP plan document terms to ensure that you're considering the correct amount of compensation when calculating contributions

5) Contributions to each participant’s SEP-IRA weren't a uniform percentage of the participant’s compensation
(More)

Divide contributions by compensation for each employee
 

Corrective contribution that would place affected employees in the position they would've been in if there were no operational plan mistakes

After the initial calculation of allocations based on the SEP plan document's terms, verify that all proposed contributions are based on a uniform percentage of participants’ compensation

6) Contributions to the SEP-IRA exceeded the maximum legal limits
(More)

Determine the total contribution made for each employee and make sure that amount does not exceed the lesser of:
1) 25% of that employee’s compensation, or
2) the dollar limitation for that year ($52,000 for 2014)

Either distribute or retain the excess amount

After the initial calculation of allocations based on the terms of the plan, check to make sure none of the proposed allocations would violate the Code

SEP Overview
EPCRS Overview
SEP Fix-It Guide (pdf)
SEP Checklist (pdf)
IRA-Based Plans Additional Resources

IRS.gov / Retirement Plans / Correcting Plan Errors / Fix-It Guides / SEP Fix-It Guide

Page Last Reviewed or Updated: 21-Jul-2014