Establish IRAs for Employees
The simplest means of setting up IRAs, including those in SEP plans, is to contact a bank, savings and loan association, insurance company, federally insured credit union, brokerage house, or mutual fund company. Whichever one you contact will supply you with the written documents you need. The language in the IRA shouldn't really vary from one source to another. You should make your choice based on whichever one delivers the best service for the lowest rates. Be sure to run your choices by your business's financial advisor.
Who is eligible for an IRA? To be eligible to set up an IRA, your employees must meet two requirements:
- They must be under age 70 1/2.
- They must have compensation or be a spouse of a person earning compensation.
You should note that there is no minimum age restriction. Children, therefore, are eligible to have an IRA, as long as they meet the compensation requirement. Children employed by your business, however, are eligible for a SEP only if you have set the minimum age requirements low enough to include them.
Once you've set up IRAs for each employee, you should complete Form 5305-SEP.
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