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Author: bdeancpa Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76421  
Subject: Re: SEP/SIMPLE Date: 1/22/1999 3:41 AM
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<<If my wife starts an SEP or SIMPLE plan for her s-corp, who directs the investments, and can it invest like any other IRA? >>

A SIMPLE plan can be a SIMPLE 401(k) variety or a SIMPLE IRA variety. The IRA variety is much more common and costs less to administer. Both the SIMPLE IRA plan and the SEP provide an IRA for each eligible employee to hold contributions. Each employee is responsible for directing their own investments within their IRA.

With a SEP, all money that goes in comes from the employer. If there are employees other than your wife who would be eligible, the SEP may cost more.

Additionally, the contribution limit to a SEP is 15% of compensation. This is only W-2 wages. It does not include other S-Corp distributions. On the other hand, if your wife's W-2 wages were only $6,000, she could still contribute the entire amount to a SIMPLE IRA (and get a match). You should consider how much it will cost to fund any other eligible employees, and whether or not your wife would have to increase her W-2 pay (and thus increase her social security and medicare taxes)in order to receive an adequate contribution under the SEP.

Hope this is helpful.
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