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Subject:  Re: 401(k) and IRAs Date:  6/17/2003  11:15 PM
Author:  dsemmler Number:  36566 of 88052

Are there any retirement plans available to me through my S-Corp., e.g. SEP IRA or Simple IRA, that provide deductible contributions beyond my max 401(k)? If so, what are the limits? I appreciate any help with this.

I am in the process of signing up for a SIMPLE-IRA with my employer and the limits for that can vary depending on the employer contribution. The employee can contribute a maximim of $8000, or $9000 if over the age of 50.

With a SIMPLE-IRA, there are a few options as far as the contributions.
The employer (aka you in this case) can elect to make a matching contribution. In this case, the employer contribution would be match the employee contribution dollar for dollar up to 3% of your salary. The matching percentage may be lower than 3% but can only do so for 2 years out of a 5 year period. Matching the full 3% would give you the most amount, with a maximum of $8000 in matching contributions.

Or, you can offer nonmatching contributions, where each eligible employee will receive a contribution totaling 2% of compensation up to $4,000 for 2003. In this case, the employee does not have to be participating in the plan to receive the employer contribution. This contribution can be restricted to employees that have earned more than a specified amount of money, I believe it is $5000.

The SEP-IRA allows for a larger contribution, however it all comes from the employer as opposed to any employee contributions. The limits for this are 25% of your compensation, up to a maximum of $40,000 for 2003. If there are more employees, all employees over 21 who have earned over a certain amount must be made eligible for the plan.

If possible, I would opt for the SEP-IRA as it allows for you to stash away a larger sum of money. Due to some odd circumstances in my case, the best I could do was the SIMPLE-IRA.

Hope that helps.

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