SARSEP IRA

Employers with fewer than 26 employees and no leased employees

Employers that are not a state or local governmental agency

Employers that are not a tax-exempt organization

The employer can restrict eligibility to employees aged 21+ with three years of service and earnings of at least $550 during each year

At least 50% of eligible employees must participate in making elective deferrals. If fewer than 50% are deferring in a plan year, then all amounts that have been deferred will be treated as “disallowed deferrals” for that year. Disallowed deferrals must be distributed as excess contributions.

No new SARSEPs may be established after 1986. However, existing plans may be moved to new vendors by restating and/or amending the plan documents.

The lesser of 100% of compensation or $17,000 in 2012

$5,500 in 2012

Non-elective contributions may be made at the employer’s discretion up to a maximum of 25% of compensation, with the annual additions maximum (employer and employee contributions combined) capped at $50,000 in 2012 ($55,500 with Over Age 50 Catch-Up)

Employer matching contributions are not permitted

The Plan is subject to annual Average Deferral Percentage (ADP) testing

The Plan is subject to “top heavy” testing and mandatory non-elective employer contributions if the Plan is deemed top heavy

Distributions are taxed when paid out to the participant

Eligible at any time

Participants may roll monies from other eligible retirement accounts

A 10% penalty is applicable on distributions taken prior to age 59½

A participant must begin taking distributions at the attainment of age 70½. The first minimum distribution must be taken by April 1st of the year following the year containing this triggering event.