2
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT
INSTRUCTIONS TO PRINTERS
FORM 5305-SEP, PAGE 2 OF 2
MARGINS; TOP 13mm (1/2"), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20. INK: BLACK
FLAT SIZE: 216mm (8-1/2") x 279mm (11")
PERFORATE: None
Page 2Form 5305-SEP (Rev. 12-2004)
Tax treatment of contributions. Employer
contributions to your SEP-IRA are excluded
from your income unless there are
contributions in excess of the applicable limit.
Employer contributions within these limits will
not be included on your Form W-2.
Completing the agreement. This agreement
is considered adopted when:
Employee contributions. You may make
regular IRA contributions to an IRA. However,
the amount you can deduct may be reduced
or eliminated because, as a participant in a
SEP, you are covered by an employer
retirement plan.
Information for the Employee
The information below explains what a SEP is,
how contributions are made, and how to treat
your employer’s contributions for tax
purposes. For more information, see Pub. 590.
SEP participation. If your employer does not
require you to participate in a SEP as a
condition of employment, and you elect not to
participate, all other employees of your
employer may be prohibited from participating.
If one or more eligible employees do not
participate and the employer tries to establish
a SEP for the remaining employees, it could
cause adverse tax consequences for the
participating employees.
1. The law that relates to your IRA.
2. The tax consequences of various options
concerning your IRA.
3. Participation eligibility rules, and rules on
the deductibility of retirement savings.
Simplified employee pension. A SEP is a
written arrangement (a plan) that allows an
employer to make contributions toward your
retirement. Contributions are made to a
traditional individual retirement
account/annuity (traditional IRA).
Contributions must be made to either a
Model traditional IRA executed on an IRS
form or a master or prototype traditional IRA
for which the IRS has issued a favorable
opinion letter.
4. Situations and procedures for revoking
your IRA, including the name, address, and
telephone number of the person designated
to receive notice of revocation. This
information must be clearly displayed at the
beginning of the disclosure statement.
Your employer will provide you with a copy of
the agreement containing participation rules and
a description of how employer contributions
may be made to your IRA. Your employer must
also provide you with a copy of the completed
Form 5305-SEP and a yearly statement showing
any contributions to your IRA.
SEP-IRA amounts—rollover or transfer to
another IRA. You can withdraw or receive
funds from your SEP-IRA if, within 60 days of
receipt, you place those funds in the same or
another IRA. This is called a “rollover” and
can be done without penalty only once in any
1-year period. However, there are no
restrictions on the number of times you may
make “transfers” if you arrange to have these
funds transferred between the trustees or the
custodians so that you never have
possession of the funds.
5. A discussion of the penalties that may
be assessed because of prohibited activities
concerning your IRA.
All amounts contributed to your IRA by your
employer belong to you even after you stop
working for that employer.
6. Financial disclosure that provides the
following information:
a. Projects value growth rates of your IRA
under various contribution and retirement
schedules, or describes the method of
determining annual earnings and charges that
may be assessed.
An employer is not required to make SEP
contributions. If a contribution is made,
however, it must be allocated to all eligible
employees according to the SEP agreement.
The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible
employee will be the same percentage of
compensation (excluding compensation
greater than $205,000*) for all employees.
b. Describes whether, and for when, the
growth projections are guaranteed, or a
statement of the earnings rate and the terms
on which the projections are based.
Withdrawals. You may withdraw your
employer’s contribution at any time, but any
amount withdrawn is includible in your
income unless rolled over. Also, if withdrawals
c. States the sales commission for each
year expressed as a percentage of $1,000.
Contribution limits. Your employer will
determine the amount to be contributed to
your IRA each year. However, the amount for
any year is limited to the smaller of $41,000*
or 25% of your compensation for that year.
Compensation does not include any amount
that is contributed by your employer to your
IRA under the SEP. Your employer is not
required to make contributions every year or
to maintain a particular level of contributions.
An employer may not adopt this IRS Model
SEP if the employer maintains another
qualified retirement plan. This does not
prevent your employer from adopting this IRS
Model SEP and also maintaining an IRS
Model Salary Reduction SEP or other SEP.
However, if you work for several employers,
you may be covered by a SEP of one
employer and a different SEP or pension or
profit-sharing plan of another employer.
● IRAs have been established for all your
eligible employees;
● You have completed all blanks on the
agreement form without modification; and
● You have given all your eligible employees
the following information:
Employers who have established a SEP
using Form 5305-SEP and have furnished
each eligible employee with a copy of the
completed Form 5305-SEP and provided the
other documents and disclosures described in
Instructions to the Employer and Information
for the Employee, are not required to file the
annual information returns, Forms 5500 or
5500-EZ for the SEP. However, under Title I of
the Employee Retirement Income Security Act
of 1974 (ERISA), this relief from the annual
reporting requirements may not be available to
an employer who selects, recommends, or
influences its employees to choose IRAs into
which contributions will be made under the
SEP, if those IRAs are subject to provisions
that impose any limits on a participant’s ability
to withdraw funds (other than restrictions
imposed by the Code that apply to all IRAs).
For additional information on Title I
requirements, see the Department of Labor
regulation at 29 CFR 2520.104-48.
In addition, the financial institution must
provide you with a financial statement each
year. You may want to keep these statements
to evaluate your IRA’s investment performance.
Excess SEP contributions. Contributions
exceeding the yearly limitations may be
withdrawn without penalty by the due date
(plus extensions) for filing your tax return
(normally April 15), but are includible in your
gross income. Excess contributions left in
your SEP-IRA after that time may have
adverse tax consequences. Withdrawals of
those contributions may be taxed as
premature withdrawals.
1. A copy of Form 5305-SEP.
2. A statement that traditional IRAs other
than the traditional IRAs into which employer
SEP contributions will be made may provide
different rates of return and different terms
concerning, among other things, transfers and
withdrawals of funds from the IRAs.
3. A statement that, in addition to the
information provided to an employee at the
time the employee becomes eligible to
participate, the administrator of the SEP must
furnish each participant within 30 days of the
effective date of any amendment to the SEP,
a copy of the amendment and a written
explanation of its effects.
4. A statement that the administrator will
give written notification to each participant of
any employer contributions made under the
SEP to that participant’s IRA by the later of
January 31 of the year following the year for
which a contribution is made or 30 days after
the contribution is made.
Financial institution requirements. The
financial institution where your IRA is
maintained must provide you with a disclosure
statement that contains the following
information in plain, nontechnical language:
SEP are deductible for your tax year with or
within which the calendar year ends.
Contributions made for a particular tax year
must be made by the due date of your
income tax return (including extensions) for
that tax year.
Paperwork Reduction Act Notice. You are
not required to provide the information
requested on a form that is subject to the
Paperwork Reduction Act unless the form
displays a valid OMB control number. Books
or records relating to a form or its instructions
must be retained as long as their contents
may become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are confidential,
as required by section 6103.
Recordkeeping
1 hr., 40 min.
If you have comments concerning the
accuracy of these time estimates or suggestions
for making this form simpler, we would be
happy to hear from you. You can write to the
Internal Revenue Service, Tax Products
Coordinating Committee, SE:W:CAR:MP:T:T:SP,
1111 Constitution Ave. NW, Washington, DC
20224. Do not send this form to this address.
Instead, keep it with your records.
Learning about the
law or the form
1 hr., 35 min.
Preparing the form
1 hr., 41 min.
The time needed to complete this form will
vary depending on individual circumstances.
The estimated average time is:
occur before you reach age 59
1
⁄2, you may be
subject to a tax on early withdrawal.
