This module focuses on the features of SIMPLE and SEP plans, which are commonly adopted by small employers looking to avoid the high administrative costs and complex rules associated with qualified plans. Calculating the contribution amount for unincorporated business owners (Keogh plan rules) are addressed. This module also examines the trend in defined benefit plans that are currently being used by small business owners with the objectives of controlling plan costs while maximizing plan benefit for themselves. These include 412(e)(3) plans funded with insurance and annuities, insurance contract plans, and cash balance plans.

4–1 Explain the basic characteristics and requirements of SIMPLE IRA and 401(k) plans.
4–2 Explain the characteristics and requirements of a simplified employee pension (SEP).
4–3 Recommend either a SEP or SIMPLE IRA for a given employer.
4–4 Determine when a defined benefit plan may be suitable for a small business owner.

About the Author

Kristen MacKenzie, MBA, CFP®, CRPC® is an associate professor at the College for Financial Planning. Kristen has over 20 years of experience in the financial services industry, both as an active financial planner and as a provider of financial education. She graduated from the University of Connecticut with a degree in economics and later received her MBA at the University of Colorado. You can contact Kristen at kristen.mackenzie@cffp.edu.

Complexity Level: Intermediate