Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement

• Legal Form Number: 5305-SEP
• Year: 2004
• Issuer: Treasury Department
• Section: Treasury Department

2

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FORM 5305-SEP, PAGE 1 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")

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OMB No. 1545-0499

Simplified Employee Pension—Individual

Retirement Accounts Contribution Agreement

Form 5305-SEP

(Rev. December 2004) Do not file

with the Internal

Revenue Service

Department of the Treasury

Internal Revenue Service (Under section 408(k) of the Internal Revenue Code)

makes the following agreement under section 408(k) of the

Internal Revenue Code and the instructions to this form.

(Name of employer)

The employer agrees to provide discretionary contributions in each calendar year to the individual retirement account or individual

retirement annuity (IRA) of all employees who are at least years old (not to exceed 21 years old) and have performed

services for the employer in at least years (not to exceed 3 years) of the immediately preceding 5 years. This simplified

employee pension (SEP) includes does not include employees covered under a collective bargaining agreement,

includes does not include certain nonresident aliens, and includes does not include employees whose total

compensation during the year is less than $450*.

The employer agrees that contributions made on behalf of each eligible employee will be:

A. Based only on the first $205,000* of compensation.

B. The same percentage of compensation for every employee.

C. Limited annually to the smaller of $41,000* or 25% of compensation.

D. Paid to the employee’s IRA trustee, custodian, or insurance company (for an annuity contract).

Name and title

Employer’s signature and date

Section references are to the Internal

Revenue Code unless otherwise noted.

When not to use Form 5305-SEP. Do not

use this form if you:

1. Currently maintain any other qualified

retirement plan. This does not prevent you

from maintaining another SEP.

Contribution limits. You may make an

annual contribution of up to 25% of the

employee’s compensation or $41,000*,

whichever is less. Compensation, for this

purpose, does not include employer

contributions to the SEP or the employee’s

compensation in excess of $205,000*. If you

also maintain a salary reduction SEP,

contributions to the two SEPs together may

not exceed the smaller of $41,000* or 25% of

compensation for any employee.

2. Have any eligible employees for whom

IRAs have not been established.

3. Use the services of leased employees

(described in section 414(n)).

4. Are a member of an affiliated service

group (described in section 414(m)), a

controlled group of corporations (described in

section 414(b)), or trades or businesses under

common control (described in sections 414(c)

and 414(o)), unless all eligible employees of

all the members of such groups, trades, or

businesses participate in the SEP.

Purpose of Form

Eligible employees. All eligible employees

must be allowed to participate in the SEP. An

eligible employee is any employee who: (1) is

at least 21 years old, and (2) has performed

“service” for you in at least 3 of the

immediately preceding 5 years. You can

establish less restrictive eligibility

requirements, but not more restrictive ones.

Simplified employee pension. A SEP is a

written arrangement (a plan) that provides you

with an easy way to make contributions

toward your employees’ retirement income.

Under a SEP, you can contribute to an

employee’s traditional individual retirement

account or annuity (traditional IRA). You make

contributions directly to an IRA set up by or

for each employee with a bank, insurance

company, or other qualified financial

institution. When using Form 5305-SEP to

establish a SEP, the IRA must be a Model

traditional IRA established on an IRS form or

a master or prototype traditional IRA for

which the IRS has issued a favorable opinion

letter. You may not make SEP contributions

to a Roth IRA or a SIMPLE IRA. Making the

agreement on Form 5305-SEP does not

establish an employer IRA described in

section 408(c).

* For 2005 and later years, this amount is subject to annual cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in the Internal Revenue

Bulletin, and on the IRS website at www.irs.gov.

Cat. No. 11825J Form 5305-SEP (Rev. 12-2004)

Article I—Eligibility Requirements (check applicable boxes—see instructions)

Article II—SEP Requirements (see instructions)

Instructions

Instructions to the Employer

Service is any work performed for you for

any period of time, however short. If you are

a member of an affiliated service group, a

controlled group of corporations, or trades or

businesses under common control, service

includes any work performed for any period

of time for any other member of such group,

trades, or businesses.

Excludable employees. The following

employees do not have to be covered by the

Form 5305-SEP (Model SEP) is used by an

employer to make an agreement to provide

benefits to all eligible employees under a

simplified employee pension (SEP) described

in section 408(k).

5. Will not pay the cost of the SEP

contributions. Do not use Form 5305-SEP for

a SEP that provides for elective employee

contributions even if the contributions are

made under a salary reduction agreement.

Use Form 5305A-SEP, or a nonmodel SEP.

Note. SEPs permitting elective deferrals

cannot be established after 1996.

If this SEP is intended to meet the

top-heavy minimum contribution rules of

section 416, but it does not cover all your

employees who participate in your salary

reduction SEP, then you must make minimum

contributions to IRAs established on behalf of

those employees.

Deducting contributions. You may deduct

contributions to a SEP subject to the limits of

section 404(h). This SEP is maintained on a

calendar year basis and contributions to the

Contributions cannot discriminate in favor of

highly compensated employees. Also, you may

not integrate your SEP contributions with, or

offset them by, contributions made under the

Federal Insurance Contributions Act (FICA).

You are not required to make contributions

every year, but when you do, you must

contribute to the SEP-IRAs of all eligible

employees who actually performed services

during the year of the contribution. This

includes eligible employees who die or quit

working before the contribution is made.

For more information on SEPs and IRAs,

see Pub. 560, Retirement Plans for Small

Business (SEP, SIMPLE, and Qualified Plans),

and Pub. 590, Individual Retirement

Arrangements (IRAs).

Do not file Form 5305-SEP with the IRS.

Instead, keep it with your records.

For Paperwork Reduction Act Notice, see page 2.

SEP: (1) employees covered by a collective

bargaining agreement whose retirement

benefits were bargained for in good faith by

you and their union, (2) nonresident alien

employees who did not earn U.S. source

income from you, and (3) employees who

received less than $450* in compensation

during the year.