Newspaper Page Text
Wednesday, June 29,1994 "Houston Time*Journal
Page 8B
Pension plans now feasible for small firms
There is good news for small
businesses and the self-employed
who are looking for a tax deduction
or a way to reward employees for
performance as well as help fund
their retirement
The IRS will allow any small
business to establish a Simplified
Employee Pension plan up until
their tax filing due date (including
extensions) for the current tax year.
Contributions to this plan will
grow tax-deferred and are an
effective way to accumulate assets
for retirement. How a SEP applies
to your business situation should
be reviewed by an accountant or tax
advisor.
Take a look at some of the
major features a SEP plan offers:
•A current tax deduction on all
eligible contributions made by the
employer.
•No fixed contribution
requirement for the employer.
•Self-directed employee
retirement accounts limit the
employer’s fiduciary responsibility.
•Flexibility to establish and/or
fund the plan by your company’s
tax filing date (including
extensions).
Phase in teens’ driving
privileges, group says
In an effort to reduce a traffic
fatality toll that is three times that
of their elders, an insurance trade
group urged today that teenagers’
driving privileges be phased in as
they gain experience.
The National Association of
Independent Insurers (NAII), based
in Des Plaines, 111., oudined a new
proposal to that effect at a
Southeast regional meeting of the
American Association of Motor
Vehicle Administrators (AAMVA)
here.
Sixteen and 17-year-old drivers
are three times more likely to die in
a traffic crash than those aged 25-
64, NAII’s Dan Kummer said.
Teenagers comprise seven percent
of U.S. drivers but account for 13
percent of motor vehicle deaths, he
added.
Further, Kummer said, the
teenage population will grow at
close to twice the rate of the overall
population over the next decade,
increasing from 24 milion in 1992
to a projected 30.8 million by the
year 2010.
A graduated driver’s license
program which NAII is urging
states to adopt would reduce the
death toll by expanding teenagers’
driving privileges as their
experience and training increase.
Teenagers would be issued a
driver’s permit initially and then a
provisional driver’s license, after
Hwy. 96 turn lanes ok’d
State Transportation
Commissioner Wayne Shackelford
announced today authorization of a
contract for Houston County to
cover the following work:
Grading drainage to widen for
left turn lanes on 0.420 mile of
roadway of SR 96 at Houston Lake
Rd.
This project has been authorized
for funding under the Georgia DOT
County Contract Program, and will
begin as soon as the contract has
been duly executed and a work order
issued.
“The viability of local roads and
streets is as important to the social
and economic welfare of Georgia as
are the interstates and other major
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•No costly reporting
requirements.
•Employees can make salary
reduction contributions if the
employer adopts optional salary
SEP plan provisions.
•Employees may be able to
make a contribution to their IRA in
addition to their salary reduction
contribution within the SEP plan.
Under a SEP plan, the employer
determines what amount, if any, to
contribute to an IRA set up for each
employee. The SEP plan
contributions, in an amount up to
15 percent of compensation or
$22,500 (whichever is less), may
be deducted as a business expense.
Each year the employer decides
to contribute to the plan, the same
percentage contributions must be
made for all eligible employees.
However, the actual amount mav be
adjusted by integrating the SEP
plan contribution with Social
Security payments. SEP plan
payments are not taxable as current
compensation to the employer or
the the employee until they are
withdrawn from the SEP plan.
Until then, all earnings grow tax
deferred.
Because each employee has his
completing driver education and six
hours of behind-lhe-wheel training.
A provisional license would
prohibit unsupervised driving
between midnight and 6 a.m., when
nearly 50 percent of teenage traffic
deaths occur.
A full driver’s license would be
issued only after the driver has had a
provisional license for 12 months
without conviction of a major
traffic offense.
The program also would subject
drivers under 21 to a “zero
tolerance” for blood alcohol content
while driving.
Kummer said the NAII intends
to work with state motor vehicle
departments to promote graduated
driver’s license legislation wherever
it is appropriate. The eventual goal
is to get such legislation in every
state.
The concept is patterned after
other successful programs such as
in New Zealand and Ontario,
Canada, Kummer said. California
and Maryland also have some facets
of the provisional driver’s license
system in their states, he added.
NAII is a non-profit trade
association representing more than
570 property-casualty insurance
companies throughout the U.S. Its
member companies account for
nearly 40 percent of the motor
vehicle insurance in the U.S.
routes,” Commissioner Shackelford
said upon authorizing the contract.
“I appreciate the cooperative efforts
of the local authorities, Senator
Sonny Perdue as well as
Representatives Robert Ray,
Johnny Floyd, Roy H. Watson, Jr.
and Larry Walker in their work with,
the DOT to make these contracts
possible.”
The County Contract and Local
Assistance Road Program are two
of several programs utilized by the
Georgia Department of
Transportation to assist local
governments in providing adequate
transportation facilities for all of
Georgia.
or her own separate account, the
employer has minimal fiduciary
responsibility to the plan.
Therefore, each employee can select
investments best-suited to his or
her own situation. The choice of
investments allowed within a SEP
plan cover a wide range and include
stocks, bonds, mutual funds and
money market funds.
Unlike most other businesses
retirement plans, a SEP plan
requires no annual administration
cost and no IRS filing on Form
5500. These are positive features
for small businesses, which already
may be burdened by government
paperwork. Minimal reporting
requirements also save costs and
make this plan popular among
small businesses.
Under an optional provision of
the SEP plan, if the employer
adopts a siary reduction plan, any
employee may be able to make
salary reduction contributions
(which are indexed to inflation) may
not exceed 15 percent of the
employee’s salary or $22,500
(whichever is less).
To elect the salary reduction
option, the employer must have 25
or fewer employees eligible to
participate, and the election is
available only if at least 50 percent
of the employees elect to make
salary reduction contributions.
Also under this option, no highly
paid employee may contribute more
than 1.25 times the average of the
lower-paid employees.
As an additional benefit to the
employee, the IRS will allow the
employee to make an additional
IRA contribution of up to $2,000
to SEP plan. This can be made to
the same account which holds the
salary reduction contribution and
the employer’s contribution.
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However, this IRA contribution
from the employee may or may not
be deductible, depending on the
level of the employee’s income.
With this in mind, if the employee
maintains one or more IRA’s
outside the plan, it may be possible
to consolidate all of his or her IRA
account with the SEP plan.
The benefits to employee may
include a reduction of IRA
maintenance costs and fees, less
paperwork, improvement of
performance tracking and the ability
to pool funds for greater investment
purchasing power.
(Editor’s note: Jake Campbell is
a Financial Consultant with The
Robinson-Humphrey Co.)
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