Salary Reduction SEP'S (Simple Plan)

The Jacobs Company Employee Sponsored Plans Salary Reduction SEPs (Simple Plan)

Additional Considerations

A. Annual Deferral Limits: The maximum annual elective deferral is $9,500 for 1996.'
B. Qualifications For A Simple Plan

    1. At least 50% of eligible employees must elect to defer compensation;
    2. During the prior year the company must have employed 25 or fewer employees; and
    3. Each "highly compensated" employee cannot defer more than 1.25 times the average deferral
        percentage for all non-highly compensated employees who are eligible to participate.

C. Time Of Contribution: Employer contributions can be made until the due date (plus extensions) of the employer's tax return. Participant contributions must be made by December 31.

D. Vesting: Vesting must always be 100%.

E. Additional IRAs: Additional IRAs are permitted if the combination meets overall IRA limits.

F. Who May Participate: Any employee who is at least 21 years old and has performed "service" in at least three of the last five calendar years must be permitted to participate under the SEP unless his or her total compensation is less than $400' for the year.

G. Investment Of Plan Assets: Plan assets can be invested in most equity products or debt instruments but may not be invested in life insurance, "hard" assets or collectibles (except for U.S. gold and silver coins). Participants direct the funds contributed on their behalf.

H. Withdrawals. Participants may withdraw or cash out at any time. However, withdrawals are subject to immediate taxation. Prior to age 59 1/2, there is an additional 10% excise tax, unless such distributions are made over the life expectancy of the IRA owner or joint life expectancy of the owner and a designated beneficiary or because of death or disability. Once the annuity format is chosen, it cannot be modified without a penalty until the later of age 59 1/2 or five years. IRC 72(t)(4)

1. Payroll Taxes. Salary reductions are subject to FICA (Social Security) and FUTA (Federal unemployement) taxes.
2. Indexed for inflation in future years.

The Basics
Advantages to Employer
Advantages to Employees
Disadvantages to Employer
Disadvantages to Employees

This document was last modified on July 27, 1999