Publication 560

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Retirement Plans for Small Business

Overview

This publication discusses retirement plans you can set up and maintain for yourself and your employees. In this publication, “you” refers to the employer. See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. This publication covers the following types of retirement plans.

  • SEP (simplified employee pension) plans.
  • SIMPLE (savings incentive match plan for employees) plans.
  • Qualified plans (also called H.R. 10 plans or Keogh plans when covering self-employed individuals).

SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. You can deduct contributions you make to the plan for your employees. If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. You can also deduct trustees' fees if contributions to the plan do not cover them. Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan.

Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free.

This publication contains the information you need to understand the following topics:

  • What type of plan to set up.
  • How to set up a plan.
  • How much you can contribute to a plan.
  • How much of your contribution is deductible.
  • How to treat certain distributions.
  • How to report information about the plan to the IRS and your employees.

Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. You may also need professional help and guidance. Also, this publication does not cover all the rules that may be of interest to employees. For example, it does not cover the following topics:

  • The comprehensive IRA rules an employee needs to know. These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs).
  • The comprehensive rules that apply to distributions from retirement plans. These rules are covered in Publication 575, Pension and Annuity Income.

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