SEPRETIREMENTPLANS
FORSMALLBUSINESSES
SEP Retirement Plans for Small Businesses is a joint project of the U.S. Department of
Labor’s Employee Benets Security Administration (EBSA) and the Internal Revenue Service.
To view this and other publications, visit the agency’s website.
To order publications, or to speak with a benefits advisor, contact EBSA electronically.
Or call toll free: 1-866-444-3272
This material will be made available in alternative format to persons with disabilities
upon request:
Voice phone: (202) 693-8644
If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1
to access telecommunications relay services.
This booklet constitutes a small en ti ty compliance guide for pur pos es of the Small Business
Regulatory Enforcement Fairness Act of 1996.
SEP RETIREMENT PLANS FOR SMALL BUSINESSES
1
Looking for an easy and low-cost retirement plan?
Why not consider a SEP?
Simplied Employee Pension (SEP) plans can provide a signicant source of income at retirement by
allowing employers to set aside money in retirement accounts for themselves and their employees.
Under a SEP, an employer contributes directly to traditional individual retirement accounts (SEP-IRAs)
for all employees (including themselves). A SEP is easier to set up and has lower operating costs than a
conventional retirement plan and allows for a contribution of up to 25 percent of each employee’s pay.
Advantages of a SEP
n Contributions to a SEP are tax deductible and your business pays no taxes on the investment
earnings.
n You are not locked into making contributions every year. In fact, each year you decide whether,
and how much, to contribute to your employees’ SEP-IRAs.
n Generally, you do not have to le any documents with the government.
n Sole proprietors, partnerships, and corporations, including S corporations, can set up SEPs.
n You may be eligible for a tax credit of up to $500 per year for the rst 3 years for the cost of
starting the plan.
n Administrative costs are low.
U.S. DEPARTMENT OF LABOR
2
As you read this booklet, here are some denitions you will nd helpful:
Employee – An “employee” is not only someone who works for you, but also includes you if you
receive compensation from the business. In other words, you can contribute to a SEP-IRA on your
own behalf. The term also includes employees of certain other businesses you and/or your family own
and certain leased employees.
Eligible Employee – An eligible employee is an employee who:
1. Is at least age 21, and
2. Has performed service for you in at least 3 of the last 5 years.
All eligible employees must participate in the plan, including part-time employees, seasonal
employees, and employees who die or terminate employment during the year.
Your SEP may also cover the following employees, but there is no requirement to cover them:
n Employees covered by a collective bargaining agreement, if retirement benets in the
collectively bargained plan were the subject of good faith bargaining;
n Nonresident alien employees who did not earn income from you; or
n Employees who received less than $750 in compensation during the year (subject to cost-of-
living adjustments).
Compensation – The term generally means the pay an employee received from you for a year’s work.
As the owner/employee, your compensation is the pay you received from the company. You must
follow the denition of compensation included in your plan document.
Establishing The Plan
There are just a few simple steps to establish a SEP.
Step 1: Contact retirement plan professional or a representative of a nancial institution that offers
retirement plans. You can choose between:
n The IRS model SEP, known as Form 5305-SEP, Simplied Employee Pension – Individual
Retirement Accounts Contribution Agreement, or
n Another plan document offered by the nancial institution.
See
Resources below for a link to the Form 5305-SEP.
Choosing a nancial institution to maintain your SEP is one of the most important decisions you will
make, because that entity becomes a trustee to the plan. Trustees work with employers and agree to:
n Receive and invest contributions, and
n Provide each participant with a notice of employer contributions made each year and the value
of his/her SEP-IRA at the end of the year.
SEP RETIREMENT PLANS FOR SMALL BUSINESSES
3
Trustees of SEP-IRAs are generally banks,
mutual funds, insurance companies that issue
annuity contracts, and certain other nancial
institutions that have been approved by the IRS.
Step 2: Complete and sign Form 5305-SEP
(or other plan document if not using the IRS
model form).
Regardless of the SEP document you choose,
it will include the name of the employer, the
requirements for employee participation, and a
written allocation formula for the employer’s
contribution. When it is completed and
signed, this form becomes the plan’s basic
legal document, describing your employees’
rights and benets. Do not send it to the IRS.
Instead, use it as a reference, because it sets
out the plan terms (for example, eligible
employees, compensation, and employer
contributions).
A SEP may be established as late as the due
date (including extensions) of the company’s
income tax return for the year you want
to establish the plan. For example, if your
business’s scal year ends on December
31 and you led for the automatic 6-month
extension, the company’s tax return for the
year ending December 31, 2022, would be due on October 15, 2023, allowing you to make the initial
SEP contribution no later than October 15, 2023.
Step 3: Give your employees a copy of the Form 5305-SEP (or other plan document if not using the
IRS model form) and its instructions, along with certain information about SEP-IRAs (described in
Employee Communications below). The model SEP is not considered adopted until each employee is
provided with a written statement explaining that:
1. A SEP-IRA may provide different rates of return and contain different terms than other IRAs
the employee may have;
2. The administrator of the SEP will provide a copy of any amendment within 30 days of the
effective date, along with a written explanation of its effects; and
3. Participating employees will receive a written report of employer contributions made to their
SEP-IRAs by January 31 of the following year.
U.S. DEPARTMENT OF LABOR
4
Operating The Plan
Once in place, a SEP is simple to operate. Your trustee will take care of depositing the contributions,
investments, annual statements, and any required lings with the IRS. You will need to ensure that
your plan is kept current with the law.
Contributions to SEP-IRAs
Your obligation is to forward contributions to your nancial institution/trustee for those employees
who participate. You will want to keep your nancial institution aware of any changes in the status of
those employees in the plan. As you hire new employees, for instance, you will include them in the
SEP if they satisfy the eligibility criteria.
Your contributions to each employee’s SEP-IRA for a year cannot exceed the lesser of 25 percent
of the employee’s compensation for the year or a dollar amount that is subject to cost-of-living
adjustments. The dollar amount is $61,000 for 2022 and $66,000 for 2023. These limits apply to your
total contributions to this plan and any other dened contribution plans (other SEP, 401(k), 403(b),
prot sharing, or money purchase plans) you have.
You do not have to contribute every year. When you do contribute, you must contribute to the
SEP-IRAs of all participants who performed work for your business during the year for which the
contributions are made, even participants who die or terminate employment before the contributions
SEP RETIREMENT PLANS FOR SMALL BUSINESSES
5
are made. Contributions for all participants generally must be uniform — for example, the same
percentage of compensation.
Employee salary reduction contributions cannot be made under a SEP.
There are special rules if you are a self-employed individual. For more information on the deduction
limitations for self-employed individuals, see IRS Publication 560, Retirement Plans for Small
Business (SEP, SIMPLE, and Qualied Plans).
How Does a SEP Work?
Here’s an example.
Quincy Company decides to establish a SEP for its employees. Quincy has chosen a SEP because its
industry is cyclical in nature, with good times and down times. In good years, Quincy can make larger
contributions for its employees, and in down times it can reduce the amount. Quincy knows that under
a SEP, the contribution rate (whether large or small) must be uniform for all employees. The nancial
institution that Quincy has selected to be the trustee for its SEP has several investment funds from which
the Quincy employees can choose. Individual employees have the opportunity to divide their employer’s
contributions to their SEP-IRAs among the funds that are made available to Quincy’s employees.
Employee Communications
When employees participate in a SEP, they must receive certain key disclosure documents from you
and the nancial institution.
n You must give employees a copy of IRS Form 5305-SEP and its instructions (or other document
that was used to establish the plan). When new employees become eligible to participate in the
plan, they also must receive a copy of the plan.
n You must also provide a written statement containing information about the terms of the SEP,
how changes are made to the plan, and when employees are to receive information about
contributions to their accounts. (See
Step 3 above.)
n In addition to the information above, the nancial institution provides an annual statement for
each participant’s SEP-IRA that reports the fair market value of that account.
n The nancial institution also gives participating employees a copy of the annual statement led
with the IRS containing contribution and fair market value information. (See
Reporting to the
Government below.)
n Generally, when an employee participating in the plan receives distributions from their account,
the nancial institution sends that employee a copy of the Form 1099-R. (See
Reporting to the
Government below.)
n The nancial institution should notify the participant by January 31 of each year when a
minimum distribution is required. (See
Distributions below.)
U.S. DEPARTMENT OF LABOR
6
Reporting to the Government
SEPs generally are not required to le annual nancial reports with the Federal Government. SEP-IRA
contributions are not included on the Form W-2, Wage and Tax Statement.
The nancial institution/trustee handling employees’ SEP-IRAs provides the IRS and participating
employees with an annual statement containing contribution and fair market value information on
Form 5498, IRA Contribution Information.
Generally, your nancial institution also will report any distributions it makes from participating
employees’ accounts on Form 1099-R, Distributions From Pensions, Annuities, Retirement or
Prot-Sharing Plans, IRAs, Insurance Contracts, etc.. The Form 1099-R is sent to those receiving
distributions and to the IRS.
Distributions
Participants cannot take loans from their SEP-IRAs.
However, participants can make withdrawals at any time. This money can be rolled over tax-free to
another SEP-IRA, to a traditional IRA, or to another employer’s qualied retirement plan (provided
the other plan allows rollovers). Money withdrawn from a SEP-IRA (and not rolled over to another
plan) is subject to income tax for the year in which an employee receives a distribution. If an employee
withdraws money from a SEP-IRA before age 59½, a 10 percent additional tax generally applies.
As with traditional IRAs, participants in a SEP-IRA must begin withdrawing a specic minimum
amount from their accounts by April 1 of the year after they reach age 72. After this initial year, they
must withdraw an additional required minimum distribution amount by December 31 of that year
and annually thereafter. The nancial institution/trustee should notify the participant by January
31 of each year when a minimum distribution is required. For more information on the required
minimum distribution amount, see IRS Publication 590-B, Distributions from Individual Retirement
Arrangements (IRAs).
Monitoring the Trustee
As the plan sponsor, you should monitor the nancial institution/trustee to ensure it is doing everything
it is required to do. You should also ensure that the trustee’s fees are reasonable for the services it
is providing. If the trustee is not doing its job properly, or if its fees are not reasonable, you should
consider replacing the trustee.
SEP RETIREMENT PLANS FOR SMALL BUSINESSES
7
Terminating The Plan
Although SEPs are established with the intention of continuing indenitely, the time may come when
a SEP no longer suits the purposes of your business. If that happens, consult with your nancial
institution to determine if another type of retirement plan might be a better alternative.
To terminate a SEP, notify the nancial institution that you will not make a contribution for the next
year and that you want to terminate the contract or agreement.
Although not mandatory, it is a good idea to notify your employees that the plan will be discontinued.
You do not need to give any notice to the IRS that the SEP has been terminated.
Mistakes… And How to Correct Them
Even with the best of intentions, those operating the plan can still make mistakes. The U.S.
Department of Labor and the IRS have correction programs to help employers with SEPs correct plan
errors, protect participants’ interests, and keep the plan’s tax benets. These programs are structured to
encourage you to correct the errors early.
Ongoing review makes it easier to spot and correct mistakes in plan operations. See the
Resources
section for further information.
Your SEP — A Quick Review
n Choose a nancial institution to set up your SEP.
n Sign the agreement and set up the SEP-IRAs.
n Tell your employees about the plan.
n Deposit contributions by the due date of your tax return.
n Monitor your nancial institution/trustee.
U.S. DEPARTMENT OF LABOR
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Resources
To nd this publication and more information on retirement plans, visit:
The U.S. Department of Labor’s Employee Benets Security Administration
n Main site
n Information for small businesses
n Retirement savings information for employers and employees
Internal Revenue Service
n Main site
n Guidance for maintaining your SEP retirement plan
n Form 5305-SEP
n Retirement Plans Startup Costs Tax Credit
n SEP Plan Checklist
In addition, the following jointly developed publications are available on the DOL and IRS websites or
can be ordered
electronically or by calling toll free: 866-444-3272.
n Choosing a Retirement Solution for Your Small Business, Publication 3998, provides an
overview of retirement plans available to small businesses.
n 401(k) Plans for Small Businesses, Publication 4222, provides detailed information regarding
the establishment and operation of a 401(k) plan.
n Adding Automatic Enrollment to Your 401(k) Plan, Publication 4721, explains how to add
automatic enrollment to your existing 401(k) plan.
n Automatic Enrollment 401(k) Plans for Small Businesses, Publication 4674, explains a type of
retirement plan that allows small businesses to increase plan participation.
n Payroll Deduction IRAs for Small Businesses, Publication 4587, describes an arrangement that
is an easy way for businesses to give employees an opportunity to save for retirement.
n Prot Sharing Plans for Small Businesses, Publication 4806, describes a exible way for
businesses to help employees save for retirement.
n SIMPLE IRA Plans for Small Businesses, Publication 4334, describes a type of retirement plan
designed especially for small businesses.
SEP RETIREMENT PLANS FOR SMALL BUSINESSES
9
For business owners with a plan
n Retirement Plan Correction Programs, Publication 4224, briey describes the IRS and DOL
voluntary correction programs.
Related materials available from DOL
DOL’s Small Business Retirement Savings Advisor helps small business owners choose the most
appropriate retirement plan for their businesses and provides resources on maintaining plans.
Related materials available from the IRS
n Retirement Plans for Small Business (SEP, SIMPLE, and Qualied Plans), Publication 560
n Contributions to Individual Retirement Arrangements (IRAs), Publication 590-A
n Distributions from Individual Retirement Arrangements (IRAs), Publication 590-B
n Have you had your Check-up this year? for Retirement Plans, Publication 3066
n SEP Checklist, Publication 4285
n Lots of Benets, Publication 4118
To view these related publications, go to the
IRS’s website.
D D D D
Simplified Employee Pension—Individual
Retirement Accounts Contribution Agreement
(Under section 408(k) of the Internal Revenue Code)
Form
5305-SEP
(Rev. December 2004)
Department of the Treasury
Internal Revenue Service
OMB No. 1545-0499
Do not file
with the Internal
Revenue Service
(Name of employer)
makes the following agreement under section 408(k) of the
Internal Revenue Code and the instructions to this form.
Article I—Eligibility Requirements (check applicable boxes—see instructions)
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)
D
includes
D
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*.
Article II—SEP Requirements (see instructions)
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).
Employer’s signature and date
Name and title
Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.
Purpose of Form
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).
Do not file Form 5305-SEP with the IRS.
Instead, keep it with your records.
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).
Instructions to the Employer
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).
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.
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.
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.
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.
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
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.
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.
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.
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).
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
* 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.
For Paperwork Reduction Act Notice, see page 2.
Cat. No. 11825J
Form
5305-SEP (Rev. 12-2004)
Form 5305-SEP (Rev. 12-2004) Page 2
SEP are deductible for your tax year with or
within which the calendar year ends.
Contributions made for a particular tax year
must be made by the due date of your
income tax return (including extensions) for
that tax year.
Completing the agreement. This agreement
is considered adopted when:
•
IRAs have been established for all your
eligible employees;
•
You have completed all blanks on the
agreement form without modification; and
•
You have given all your eligible employees
the following information:
1. A copy of Form 5305-SEP.
2. A statement that traditional IRAs other
than the traditional IRAs into which employer
SEP contributions will be made may provide
different rates of return and different terms
concerning, among other things, transfers and
withdrawals of funds from the IRAs.
3. A statement that, in addition to the
information provided to an employee at the
time the employee becomes eligible to
participate, the administrator of the SEP must
furnish each participant within 30 days of the
effective date of any amendment to the SEP,
a copy of the amendment and a written
explanation of its effects.
4. A statement that the administrator will
give written notification to each participant of
any employer contributions made under the
SEP to that participant’s IRA by the later of
January 31 of the year following the year for
which a contribution is made or 30 days after
the contribution is made.
Employers who have established a SEP
using Form 5305-SEP and have furnished
each eligible employee with a copy of the
completed Form 5305-SEP and provided the
other documents and disclosures described in
Instructions to the Employer and Information
for the Employee, are not required to file the
annual information returns, Forms 5500 or
5500-EZ for the SEP. However, under Title I of
the Employee Retirement Income Security Act
of 1974 (ERISA), this relief from the annual
reporting requirements may not be available to
an employer who selects, recommends, or
influences its employees to choose IRAs into
which contributions will be made under the
SEP, if those IRAs are subject to provisions
that impose any limits on a participant’s ability
to withdraw funds (other than restrictions
imposed by the Code that apply to all IRAs).
For additional information on Title I
requirements, see the Department of Labor
regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is,
how contributions are made, and how to treat
your employer’s contributions for tax
purposes. For more information, see Pub. 590.
Simplified employee pension. A SEP is a
written arrangement (a plan) that allows an
employer to make contributions toward your
retirement. Contributions are made to a
traditional individual retirement
account/annuity (traditional IRA).
Contributions must be made to either a
Model traditional IRA executed on an IRS
form or a master or prototype traditional IRA
for which the IRS has issued a favorable
opinion letter.
An employer is not required to make SEP
contributions. If a contribution is made,
however, it must be allocated to all eligible
employees according to the SEP agreement.
The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible
employee will be the same percentage of
compensation (excluding compensation
greater than $205,000*) for all employees.
Your employer will provide you with a copy of
the agreement containing participation rules and
a description of how employer contributions
may be made to your IRA. Your employer must
also provide you with a copy of the completed
Form 5305-SEP and a yearly statement showing
any contributions to your IRA.
All amounts contributed to your IRA by your
employer belong to you even after you stop
working for that employer.
Contribution limits. Your employer will
determine the amount to be contributed to
your IRA each year. However, the amount for
any year is limited to the smaller of $41,000*
or 25% of your compensation for that year.
Compensation does not include any amount
that is contributed by your employer to your
IRA under the SEP. Your employer is not
required to make contributions every year or
to maintain a particular level of contributions.
Tax treatment of contributions. Employer
contributions to your SEP-IRA are excluded
from your income unless there are
contributions in excess of the applicable limit.
Employer contributions within these limits will
not be included on your Form W-2.
Employee contributions. You may make
regular IRA contributions to an IRA. However,
the amount you can deduct may be reduced
or eliminated because, as a participant in a
SEP, you are covered by an employer
retirement plan.
SEP participation. If your employer does not
require you to participate in a SEP as a
condition of employment, and you elect not to
participate, all other employees of your
employer may be prohibited from participating.
If one or more eligible employees do not
participate and the employer tries to establish
a SEP for the remaining employees, it could
cause adverse tax consequences for the
participating employees.
An employer may not adopt this IRS Model
SEP if the employer maintains another
qualified retirement plan. This does not
prevent your employer from adopting this IRS
Model SEP and also maintaining an IRS
Model Salary Reduction SEP or other SEP.
However, if you work for several employers,
you may be covered by a SEP of one
employer and a different SEP or pension or
profit-sharing plan of another employer.
SEP-IRA amounts—rollover or transfer to
another IRA. You can withdraw or receive
funds from your SEP-IRA if, within 60 days of
receipt, you place those funds in the same or
another IRA. This is called a “rollover” and
can be done without penalty only once in any
1-year period. However, there are no
restrictions on the number of times you may
make “transfers” if you arrange to have these
funds transferred between the trustees or the
custodians so that you never have
possession of the funds.
Withdrawals. You may withdraw your
employer’s contribution at any time, but any
amount withdrawn is includible in your
income unless rolled over. Also, if withdrawals
occur before you reach age 59
1
⁄2, you may be
subject to a tax on early withdrawal.
Excess SEP contributions. Contributions
exceeding the yearly limitations may be
withdrawn without penalty by the due date
(plus extensions) for filing your tax return
(normally April 15), but are includible in your
gross income. Excess contributions left in
your SEP-IRA after that time may have
adverse tax consequences. Withdrawals of
those contributions may be taxed as
premature withdrawals.
Financial institution requirements. The
financial institution where your IRA is
maintained must provide you with a disclosure
statement that contains the following
information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options
concerning your IRA.
3. Participation eligibility rules, and rules on
the deductibility of retirement savings.
4. Situations and procedures for revoking
your IRA, including the name, address, and
telephone number of the person designated
to receive notice of revocation. This
information must be clearly displayed at the
beginning of the disclosure statement.
5. A discussion of the penalties that may
be assessed because of prohibited activities
concerning your IRA.
6. Financial disclosure that provides the
following information:
a. Projects value growth rates of your IRA
under various contribution and retirement
schedules, or describes the method of
determining annual earnings and charges that
may be assessed.
b. Describes whether, and for when, the
growth projections are guaranteed, or a
statement of the earnings rate and the terms
on which the projections are based.
c. States the sales commission for each
year expressed as a percentage of $1,000.
In addition, the financial institution must
provide you with a financial statement each
year. You may want to keep these statements
to evaluate your IRA’s investment performance.
Paperwork Reduction Act Notice. You are
not required to provide the information
requested on a form that is subject to the
Paperwork Reduction Act unless the form
displays a valid OMB control number. Books
or records relating to a form or its instructions
must be retained as long as their contents
may become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are confidential,
as required by section 6103.
The time needed to complete this form will
vary depending on individual circumstances.
The estimated average time is:
Recordkeeping
1 hr., 40 min.
Learning about the
law or the form
1 hr., 35 min.
Preparing the form 1 hr., 41 min.
If you have comments concerning the
accuracy of these time estimates or suggestions
for making this form simpler, we would be
happy to hear from you. You can write to the
Internal Revenue Service, Tax Products
Coordinating Committee, SE:W:CAR:MP:T:T:SP,
1111 Constitution Ave. NW, Washington, DC
20224. Do not send this form to this address.
Instead, keep it with your records.
