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)

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