A:

It depends. The employee should meet not only the service requirements, but the age and compensation requirements as well. For instance, if your simplified employee pension (SEP) requires employees to be at least 21 years old before becoming eligible to participate in the plan, employees under age 21 would not be eligible to receive an SEP contribution.

In addition, if your plan requires that employees perform service for three of the five preceding years and the employee has met this and the other eligibility requirements, then an SEP contribution must be made to that employee's account for any year that you make a SEP contribution to your account or any other participant's account.

For a detailed explanation on how to determine whether an employee is eligible to receive an SEP contribution, see Establishing An SEP IRA and Plans The Small Employer Can Establish.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  2. What are the best ways to use your 401(k) without a penalty?

    The best way to use your 401(k) retirement savings account is to take normal distributions after you reach retirement age. ... Read Full Answer >>
  3. How are spousal benefits calculated for Social Security?

    The amount of your Social Security spousal benefit depends on a number of factors, including your age, the maximum amount ... Read Full Answer >>
  4. How does divorce affect Social Security benefits?

    If you are eligible to receive Social Security retirement benefits on your own account, your marital status has no impact ... Read Full Answer >>
  5. Are Social Security benefits affected by marriage?

    The amount of Social Security benefit you are eligible to collect upon retirement is not affected by marriage. Your benefit ... Read Full Answer >>
  6. Can I take my 401(k) to buy a house for my children?

    Under the standard regulations for 401(k) retirement savings plans, you may elect to withdraw funds from your 401(k) for ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    What Does Bootstrap Mean?

    The term bootstrap refers to launching and building a business with little capital and no funding from outside sources.
  2. Economics

    Explaining the Balanced Scorecard

    A balanced scorecard is a metric that measures a business’ performance.
  3. Professionals

    How to Protect Elderly Clients from Predators

    Advisors dealing with older clients face a specific set of difficulties. Here's how to help protect them.
  4. Professionals

    Social Security 'Start, Stop, Start' Explained

    The start, stop, start Social Security strategy is complicated. Here's what retirees considering it need to consider.
  5. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
  6. Professionals

    Small RIAs: How to Level the Playing Field

    In order to compete with larger firms, small RIAs have to get a little creative. Here are a few ways to kickstart growth.
  7. Professionals

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  8. Entrepreneurship

    Top 5 Startups That Emerged in Boston

    Learn why Boston is a hot market for startups, and familiarize yourself with a few of the top startups that have emerged from the city.
  9. Entrepreneurship

    Top 7 Startups That Emerged in Mexico City

    Learn why Mexico City has the potential to emerge as a major player in the startup scene, and identify several companies leading the way.
  10. Investing News

    Employee Or Contractor? An On-Demand Economy Problem

    Several on-demand economy startups classify, or classified, their workers as contractors rather than employees. It is an unconventional approach to hiring and has been a hit with venture capitalists ...
RELATED TERMS
  1. Record Date

    The cut-off date established by a company in order to determine ...
  2. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
  3. Corporate Culture

    The beliefs and behaviors that determine how a company's employees ...
  4. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  5. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  6. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!