Every year about this time, as we get closer to tax filing time, I get a few calls from those business owners who couldn’t quite get around to setting up a retirement plan before the end of the year. They ask the question with not a lot of hope in their heart: “Can I still set up a retirement plan for last year?”

Fortunately for them, there is such a possibility. I call it the "procrastinator’s pension plan,” but you probably heard of it under the name that Congress gave it: Simplified Employee Pension (SEP), which is an IRA-based retirement plan that a business owner can adopt for a prior year. Here are a few of the details:

  • Any employer can set up one up using IRS Form 5305-SEP.
  • No filing fee is required.
  • It must be offered to all employees who are at least 21 years of age, employed by the employer for three of the last five years and had compensation of $550 for 2012 and for 2013.
  • Only employer contributions can be made in an amount not to exceed 25% of compensation or $51,000.
  • Contributions must be immediately 100% vested.

As you can see, it’s not as nearly as flexible as a traditional profit sharing or 401(k) plan, but, hey, it can be done now.

“Now” means that the business owner has to establish and fund the SEP by the due date of his or her 2013 business tax return, including extensions. For calendar year tax payers, the due date depends on the type of business organization:

  • Sole Proprietorship reporting on Schedule C of Form 1040: April 15, 2014 (Oct. 15, 2014 if an extension is filed)
  • Partnership filing Form 1065: April 15, 2014 (Sept. 15, 2014 if an extension is filed) if you file for an extension)
  • Corporation filing Form 1120 or 1120S: March 15, 2014 (Sept. 15, 2014 if an extension is filed).

There are a lot more details, of course, and taxpayers should talk this over with their tax advisers now. Time is running out.

You can order the T-shirt pictured above from Skreened if you get around to it. 

This post originally appeared on the Be Advised Blog of Employee Benefit Advisor for which I am a member of the Editorial Advisory Board.