414(w) permissible withdrawal feature to SIMPLE IRAs and grandfathered SARSEPs
1, 1997, no new SARSEPs
may be established; however, those in existence as of Dec.
are no longer available, but plans established prior to 1997 still are allowed to continue.
The new ERSA would consolidate 401(k), thrift, 403(b), and governmental 457 plans, as well as SARSEPs
(Salary Reduction Simplified Employee Pension) and SIMPLE (Savings Incentive Match Plan for Employees) accounts.
Employers may continue SARSEPs
established before 1997, but no new SARSEPs
Effective for 1997, these new plans replace salary-reduction simplified employee pensions (SARSEPs
); after 1996, no new SARSEPs
may be established (although existing ones may continue to receive contributions).
are repealed for years after 1996, but if already established, they may continue to receive contributions.
For this purpose, Retirement Plans do not include retail non-retirement accounts, SEPs, SARSEPs
or SIMPLE IRAs.
may no longer be established after December 31, 1996.
More flexible than the unpopular SARSEPs
(salary reduction SEPs), which are limited to companies with 24 or fewer employees (see page 5 1) and which require contributions from at least half of the employees.
While there are certain similarities in the applicable rules, SEPs and SARSEPs
are subject to special rules and limitations not applicable to qualified plans that are often misunderstood or misinter-preted by the person (usually not a professional adviser) "administering" the SEP program.
One offshoot of the SEP is the salary-reduction option, known as a SARSEP