Many employers adopt SEPs and SIMPLE IRAs because they think they’re easy to use. They can be, but they still have to be operated properly. The IRS is now auditing SEPs and SIMPLEs, and more than half – yes, more than 50% – of the plans examined have operational errors. The Fall 2007 issue of the IRS publication Retirement News for Employers cites a number of common operational errors, some of which are the same as those made with qualified retirement plans:
- Failure to amend the plan for recent legislation
- Violation of the plan’s participation and eligibility requirements
- Contributions made over the allowable limits
- Late deposits of employee deferrals
Click here to download (PDF) the IRS publication which beginning on page 2 discusses their audit results and has links to IRS resources on SEP and SIMPLE IRAs and how to fix operational errors.