Approximately 39 million Americans are covered by some form of employer-sponsored retirement plan. An almost equal amount have no form of retirement plan other than Social Security. Qualified retirement plans are an excellent way to supplement Social Security. They offer sponsoring employers tax advantages and at the same time help them attract and retain quality employees. Simplified Employee Pension Plans, or SEP's, offer employers an easy way to set aside retirement funds for themselves and their employees. Retirement can be the greatest years of your life. Start by saving now. You'll be amazed at how much you can increase your retirement income with a Simplified Employee Pension Plan from Erie Family Life. It's a great idea!

What is SEP?

A Simplified Employee Pension Plan is a retirement plan that provides employers a simple way to make contributions toward employees' retirement income. SEPs are exempt from the complex rules and reporting requirements that govern other qualified retirement plans. Employers contribute directly to an Individual Retirement Account that is established by each eligible employee.

What Are the Advantages of a SEP?

• Contributions are tax deductible on your federal Income tax return (to established limits). Your employees also benefit because the interest earned is tax deferred until benefits are received.
  
• The employer's contribution is excludible income to the employee. Employees do not pay on the contribution until withdrawn.
  
• You can decide each year whether or not you will contribute to the plan, and how much you will contribute.
  
• No annual filing requirements.
  

Am I Eligible for a SEP?

As an employee you may be eligible if you:

• Do not maintain any other qualified retirement plan.
  
• Have not maintained in the past a defined benefit plan (even if the plan is now terminated).
  
• Do not use the services of leased employees.
  
• Are not a member of a controlled group (a parent/subsidiary group or combined group of corporations or businesses), unless all eligible employees of the group participate under the SEP.

Who Has to be Included in the Plan?

Employees at least 21 years of age, who have performed service for at least three of the preceding five years, and have received the minimum compensation as defined by the Internal Revenue Service from the employer for the year, must be included in the SEP. Less restrictive eligibility requirements may be established by the employer.

How Much Can I Contribute?

As a general rule, the maximum contribution for any one employee may not exceed the lesser of $30,000 or 15 percent of the employee's total compensation up to $150,000. A smaller percentage can be elected. The contribution level can change each year and is not required every year. The percent of contribution you choose must be the same for all participants.

What Are The Vesting Requirements?

All participants in a SEP are immediately vested in each contribution.

Can Employees Make Voluntary Contributions?

No. SEPs are employer-paid plans. Separate plans are available that permit employee contributions.

When Can I Take My Money Out of a SEP?

Withdrawals and retirement benefits can be taken out at any time. Certain penalties can apply to distributions made before age 59 1/2. There are exceptions that avoid the penalty. Consult your tax advisor to determine if there will be any penalty imposed on such premature distributions. In addition, you must begin taking at least the required minimum annual distribution from your SEP by April 1 of the year following the year in which you reach age 70 1/2.

When Do I Pay Taxes on My SEP?

SEP benefit payments are reportable as ordinary income in the year they are received.

What Settlement Options Do I Have at Retirement?

Erie Family Life offers a variety of settlement options. With careful planning you can design a benefit schedule to meet any need or situation. Some of the more popular options include:

• A Life Annuity - Pays an income for as long as you live.
  
• A Period Certain Annuity - Pays an income for a specified number of years including a lifetime income.
  
• Payments of a Fixed Amount - Pays a fixed amount until the account value is exhausted.
  
• Interest Only - Pays the interest earnings on a periodic basis, thereby preserving the account value.
  
• A Joint and Survivor Annuity - Pays an income for as long as either you or the joint annuitant is alive. In the event of death during the benefit payment period, any guaranteed payments remaining are paid according to the original benefit schedule to the designated beneficiary.
  

What Makes An Erie Family Life SEP So Attractive?

• Flexibility of Premium Payments - You can establish an Individual Retirement Annuity with a one-time premium payment, or a Flexible Premium Retirement Annuity designed to accept periodic contributions.
  
• Flexibility of Settlement Options - You can select from a variety of settlement options that can be tailored to your situation. You can even select a lifetime income option that provides an income you cannot outlive.
  
• Optional Waiver of Premium Benefit - This benefit provides for the continuation of annuity premium payments should you become permanently disabled as provided for in the contract.
  
• No "Front-End" Loads or Expense Charges - The only charge applicable to an Erie Family Life annuity is a graded surrender charge imposed on partial or complete surrender made within the first five years of the contract.
  
• Proceeds Not Subject to Probate - Proceeds paid to a named person as a result of the annuitant's death are not subject to probate.
  

The Thomas M. Frick Insurance Agency can provide you with the necessary information and procedures to start an Erie Family Life SEP today.

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