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SEP/IRAsA Valuable RetirementBenefit for You andYour Employees
Stifel Nicolaus is a full-service securities firmwith a distinguished history of providing clientsquality advice and personal service. Establishedin 1890 and headquartered in St. Louis, Missouri,Stifel Nicolaus is one of the nation’s leadinginvestment firms.Clients rely upon Stifel Nicolaus’ entrepreneurialspirit and innovative thinking to meet financialgoals amidst today’s complex challenges. Thefirm’s comprehensive portfolio of financial services is designed to meet the varied needs of abroad range of investors. The company providessecurities brokerage, investment banking, trading,investment advisory, and related financial servicesto individual investors, institutions, corporations,and municipalities.The firm’s reputation is founded on trust and understanding, or, in other words, strong individual relationships that stand the test of time. From our firstcentury and into the new millennium, we diligentlyuphold a commitment to putting the client’s interestfirst. That’s because at Stifel Nicolaus, client care,expert service, and reliable, consistent advice driveour success.Stifel Nicolaus is a member of the Securities InvestorProtection Corporation (SIPC), the New York StockExchange, Inc., and other principal exchanges. Stifel,Nicolaus & Company, Incorporated is a wholly ownedsubsidiary of Stifel Financial Corp. Stifel FinancialCorp.’s publicly traded stock is listed on the New YorkStock Exchange under the symbol “SF.”1
SEP/“Now you can provide a valuableretirement benefit for you andyour employees without thecost and complexities typicallyassociated with company-” sponsored retirement plans.2
IRASmall business owners face two commonproblems: 1) hiring and retaining qualityemployees and 2) taxes. To address theseissues, many employers have establishedretirement savings programs. But maintainingsome r etirement plans can be very costly andtime consuming.Now you can provide a valuable retirementbenefit for you and your employees withoutthe cost and complexities typically associatedwith company- sponsored retirement plans.A Stifel Nicolaus Simplified EmployeePension Plan/Individual Retirement Account(SEP/IRA) is easy to establish and costefficient to maintain. You and your eligibleemployees simply open separate SEP/IRAs.All contributions you make flow directly intoeach of these individual accounts. Contributions are fully deductible for federal incometax purposes (subject to certain limits), andthey compound tax-deferred until distributionsare taken, generally after age 59 1/2.Almost any business can set up a SEP/IRA:corporations, partnerships, even self-employedindividuals. Most small businesses are ideallysuited for a SEP/IRA program.We encourage you to spend a few minutes tolearn more about this valuable program. Ifyou have any questions regarding a SEP/IRA,please contact your Stifel Nicolaus FinancialAdvisor.3
CommonlyQuestionsQ: What is a SEP/IRA?A SEP/IRA is a company-sponsoredretirement plan that allows small businessowners to assist employees in savingmoney for retirement and to reduce theircompanies’ income taxes. SEP/IRAs arelow-cost plans with little administrativehassle. Employers deposit tax-deductibledollars into each employee’s personal SEP/IRA, and such contributions are 100%immediately vested.Contributions and earnings compound taxdeferred until distributions are taken fromthe account. Normal IRA distributionrules apply to SEP/IRAs.Q: What are some advantages of aSEP/IRA? SEP/IRAs aren’t limited to the standardIRA maximum contribution limits. You may contribute to each eligibleemployee as much as 25% of theemployee’s annual compensation(“earned income” for self-employedindividuals), up to the IRS compensation cap. Unlike traditional pension plans, aSEP/IRA allows you to vary yourcontributions from year to year to suityour cash flow. In fact, you can skip ayear altogether and still retain the taxfavored growth for established SEP/IRAaccounts.4
?y Asked You deduct all contributions made onbehalf of employees, including yourself,reducing your company’s tax bill. You give your employees a valuableretirement benefit without adding totheir federal tax obligation. Your employees gain the ability to directtheir investments based on their ownobjectives.Q: Which employers can offerSEP/IRA plans?Any sole proprietor, partnership, nonprofitorganization, or corporation may establisha SEP plan.Q: Am I required to makea contribution for all myemployees?Generally, all employees must be includedin a SEP plan after meeting certaineligibility requirements. Your organizationcan choose to exclude the followingcategories of employees:— Employees who have worked forthe employer less than three of theimmediately preceding five years— Employees who earned less than 500 (2009) per year— Union members covered by acollective bargaining agreement— Certain nonresident aliens— Employees under 21 years of age5
Q: How much must I contribute?There are no mandatory contributions,unless your plan is Top Heavy. You havethe option to vary your contributions fromyear to year or to not contribute at all.Generally, you must contribute to all eligibleemployees the same percentage of theirannual compensation (see the discussion ofSocial Security Integration that follows).The maximum amount that you can contribute each year, and deduct as a qualifiedbusiness expense, is 25% of all eligibleemployees’ compensation. The annualmaximum is limited to 49,000 (as indexedfor 2009) per person.Q: What is “compensation”?All earned income is consideredcompensation, although compensation inexcess of 245,000 (as indexed for 2009)may not be counted.6
For self-employed individuals, thecontribution is based on “net businessincome,” which is self-employmentincome, minus half of the self-employmenttaxes paid, further reduced by the amountof the deductible plan contribution.Consult your tax advisor to calculate yourcontribution.Q: Can I take credit for SocialSecurity payments I makefor my employees when I determine my contributions?Yes, in an indirect way. By electing to takeadvantage of “Social Security Integration,”you can offset the Old Age (OA) portionof the Social Security tax you’ve paid onbehalf of your employees.Since Social Security provides proportionately higher benefits to lower-paid employees, SEP integration rules compensate forthis by allowing proportionately higherSEP contributions to employees earningmore than the Social Security Wage Base.Q: What are my IRS filing requirements?There is no reporting made to the InternalRevenue Service (IRS) aside from claiming your SEP/IRA contributions as deductions on your corporate tax return, orindividual return if self-employed. Maintaining a SEP/IRA offers an important employee benefit and a valuable tax deductionwith virtually no employer administration.7
Q: Are my employees taxed on thecontributions I make for them?No. Your contributions are not includedas taxable income and are not reportedon your employees’ annual Form W-2 ascompensation. Your contributions are alsonot subject to FICA (Social Security) andFUTA (unemployment) taxes.By the same token, your employees cannotclaim a deduction for any portion of thecontributions that you make on theirbehalf. Only the employer is permittedto claim the contributions as a deductionfor tax purposes. Contributions and theearnings will be taxed as ordinary incomewhen the employees withdraw in thefuture.Q: Can my employees make SEP contributions to the SEP/IRA?A SEP plan that allows employees to makepre-tax salary deferrals is called a SalaryReduction SEP (SARSEP). This optionwas available for SEP plans establishedprior to December 31, 1996. No newSARSEP plans can be established.Q: Can new eligible employees beadded to an existing SARSEPplan?Yes. Businesses with SARSEPs established prior to December 31, 1996, andwith 25 or fewer eligible employees mayadd new eligible employees and continueto operate as before.8
Q: Can my employees make Traditional IRA contributionsinto their SEP/IRAs?Yes, they can. You can too. In fact,many employees maintain their personalTraditional IRAs as part of their SEP/IRAplan. Contributions are made directly bythe employee to the SEP account and canbe made each year even if you don’t makeemployer SEP contributions.For years in which an employer SEPcontribution is made, an employee isconsidered an “active participant” in anemployer-sponsored plan. Therefore, IRAcontributions made by an employee maynot be deductible, depending upon theemployee’s adjusted gross income (AGI).Q: What are my contribution deadlines?You may elect to operate your plan on acalendar or fiscal year basis. The deadlinefor set-up of and contributions to a SEP/IRA is the due date of your company’s taxreturn (plus extensions, if granted). Thisis the only employer-sponsored retirementplan that enables an employer to create andfund a plan after the end of the year.9
Q: When can employees accessthis money?All contributions are immedicately 100%vested, so a participant can withdrawthe funds at any time. Distributions aretaxed as ordinary income and may also besubject to a 10% penalty if the participantis under age 59 1/2 when the distributionis made. Standard IRA exceptions to the10% penalty include death, disability, firsttime homebuyer, higher education, certainhealth insurance or medical expenses,certain declared Presidential disasterarea relief, active duty, and Rule 72(t),substantially equal periodic payments.10
Q: How do I establish a StifelNicolaus SEP/IRA?An individual account will be establishedand maintained for each participant in theplan. With a Stifel Nicolaus SEP/IRA, eachSEP plan participant has full flexibility toinvest their assets as they choose to meettheir own goals and objectives. Your StifelNicolaus Financial Advisor is availableto assist each participant with his or herinvestment decisions.An Affordable Flexible Solution —SEP/IRABy establishing and contributing to a SEP/IRA,you reduce taxes while giving your employeeswhat they want — a program for retirementsavings. In fact, a company-sponsoredretirement plan is among the most importantfringe benefits among employees.The SEP plan gives you an affordable solutionwith flexibility in the amount you contribute.It’s easy to establish and simple to administer.Stifel Nicolaus adds value to this alreadybeneficial retirement program with outstandingservice and personalized investment educationand advice for each of your participants.Everyone benefits from planning now. Callyour Stifel Nicolaus Financial Advisor toestablish your company’s SEP/IRA today.11
One Financial Plaza501 North BroadwaySt. Louis, Missouri 63102(314) 342-2000www.stifel.comMember SIPC and New York Stock Exchange, Inc.Investment Services Since 1890SN8a-8/09
A Stifel Nicolaus Simplified Employee Pension Plan/Individual Retirement Account (SEP/IRA) is easy to establish and cost efficient to maintain. You and your eligible employees simply open separate SEP/IRAs. All contributions you make flow directly into each of these individual account
