CONCORDE FINANCIAL CORPORATION
SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL
RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
(Under Section 408(k) of the Internal Revenue Code)
__________________________ makes the following agreement under
(Name of employer)
Section 408(k) of the Internal Revenue Code and the instructions to this
form.
Article I--Eligibility Requirements (Check appropriate boxes--see
Instructions.)
The employer agrees to provide for discretionary contributions in each
calendar year to the individual retirement account or individual
retirement annuity (▇▇▇) of all employees who are at least ______ years
old (not to exceed 21 years old) and have performed services for the
employer in at least ______ years (not to exceed 3 years) of the
immediately preceding 5 years. This simplified employee pension (SEP) G
includes G does not include employees covered under a collective
bargaining agreement, G includes G does not include certain nonresident
aliens, and G includes G does not include employees whose total
compensation during the year is less than $400*.
Article II--SEP Requirements (See Instructions.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
A. Based only on the first $160,000* of compensation.
B. Made in an amount that is the same percentage of compensation for
every employee.
C. Limited annually to the smaller of $30,000* or 15% of
compensation.
D. Paid to the employee's ▇▇▇ trustee, custodian, or insurance company
(for an annuity contract).
The amount is adjusted annually. The IRS announces the increase, if
any, in a news release and in the Internal Revenue Bulletin.
Employer's Signature and date Name and title
CONCORDE FINANCIAL CORPORATION
SIMPLIFIED EMPLOYEE PENSION
Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benefits to all eligible employees under a SEP described in
section 408(k). Do not file this form with the IRS. See Pub. 560,
Retirement Plans for the Self-Employed, and Pub. 590, Individual
Retirement Arrangements (IRAs).
Instructions to the Employer
Simplified Employee ▇▇▇▇▇▇▇.▇▇ SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your
employees' retirement income. Under a SEP, you can contribute to an
employee's individual retirement account or annuity (▇▇▇). You make
contributions directly to an ▇▇▇ set up by or for each employee with a
bank, insurance company, or other qualified financial institution. When
using Form 5305-SEP to establish a SEP, the ▇▇▇ must be a Model ▇▇▇
established on an IRS form or a master or prototype ▇▇▇ for which the IRS
has issued a favorable opinion letter. Making the agreement on Form 5305-
SEP does not establish an employer ▇▇▇ described in section 408(c).
When Not To Use Form 5305-SEP.CDo not use this form if you:
1. Currently maintain any other qualified retirement plan. This
does not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section
414(n)).
5. Are a member of an affiliated service group (described in
section 414(m)), a controlled group of corporations (described in section
414(b)), or trades or businesses under common control (described in
sections 414(c) and 414(o)), unless all eligible employees of all the
members of such groups,trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even
if the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective
deferrals to a SEP.
Note: SEPs permitting elective deferrals cannot be established after
1996.
Eligible ▇▇▇▇▇▇▇▇▇.▇▇▇▇ eligible employees must be allowed to participate
in the SEP. An eligible employee is any employee who: (1) is at least 21
years old, and (2) has performed "service" for you in at least 3 of the
immediately preceding 5 years.
Note: You can establish less restrictive eligibility requirements, but
not more restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations,or trades or businesses under common control,
service includes any work performed for any period of time for any other
member of such group,trades, or businesses.
Excludable Employees.CThe following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their
union, (2) nonresident alien employees who did not earn U.S.source income
from you, and (3) employees who received less than $400* in compensation
during the year.
Contribution Limits.CThe SEP rules permit you to make an annual contributio
of up to 15% of the employee's compensation or $300,000*, whichever is less.
Compensation, for this purpose, does not include employer contributions to
the SEP or the employee's compensation in excess of $160,000*. If you also
maintain a Model Elective SEP or any other SEP that permits employees to make
elective deferrals, contributions to the two SEPs together may not exceed the
smaller of $300,000* or 15% of compensation for any employee.
The amount is adjusted annually. The IRS announces the increase, if any, in
a news release and in the Internal Revenue Bulletin.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But you
must contribute to the SEP-IRAs of all of the eligible employees who
actually performed services during the year of the contribution. This
includes eligible employees who die or quit working before the contribution
is made.
You may also not integrate your SEP contributions with, or offset
them by, contributions made under the Federal Insurance Contributions Act
(FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who
participate in your elective SEP, then you must make minimum contributions to
IRAs established on behalf of those employees.
Deducting Contributions.--You may deduct contributions to a SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with or
within which the calendar year ends. Contributions made for a particular tax
year must be made by the due date of your income tax return (including
extensions) for that tax year.
Completing the Agreement.--This agreement is considered adopted when:
! IRAs have been established for all your eligible employees;
! You have completed all blanks on the agreement form without modification;
and
! You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which
employer SEP contributions will be made may provide different rates of
return and different terms concerning, among other things, transfers and
withdrawals of funds from the IRAs.
3. A statement that, in addition to the information provided
to an employee at the time the employee becomes eligible to participate,
the administrator of the SEP must furnish each participant within 30 days
of the effective date of any amendment to the SEP, a copy of the amendment
and a written explanation of its effects.
4. A statement that the administrator will give written
notification to each participant of any employer contributions made under
the SEP to that participant's ▇▇▇ by the later of January 31 of the year
following the year for which a contribution is made or 30 days after the
contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-SEP
and provided the other documents and disclosures described in Instructions
to the Employer and Information for the Employee, are not required to
file the annual information returns, Forms 5500, 5500-C/R, or 5500-EZ for
the SEP. However, under Title I of ERISA, this relief from the annual
reporting requirements may not be available to an employer who selects,
recommends, or influences its employees to choose IRAs into which
contributions will be made under the SEP, if those IRAs are subject to
provisions that impose any limits on a participant's ability to withdraw
funds (other than restrictions imposed by the Code that apply to all IRAs).
For additional information on Title I requirements, see the Department of
Labor regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
Simplified Employee Pension.--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (▇▇▇).
Contributions must be made to either a Model ▇▇▇ executed on an IRS form or
a master or prototype ▇▇▇ for which the IRS has issued a favorable opinion
letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible employee will be the same
percentage of compensation (excluding compensation higher than $160,000*)
for all employees.
Your employer will provide you with a copy of the agreement
containing participation rules and a description of how employer
contributions may be made to your ▇▇▇. Your employer must also provide you
with a copy of the completed Form 5305-SEP and a yearly statement showing
any contributions to your ▇▇▇.
All amounts contributed to your ▇▇▇ by your employer belong to you
even after you stop working for that employer.
Contribution Limits.--Your employer will determine the amount to be
contributed to your ▇▇▇ each year. However, the amount for any year is
limited to the smaller of $30,000* or 15% of your compensation (currently
limited to $160,000) for that year.
Compensation does not include any amount that is contributed by your
employer to your ▇▇▇ under the SEP. Your employer is not required to make
contributions every year or to maintain a particular level of
contributions.
Tax Treatment of Contributions.--Employer contributions to your SEP-▇▇▇ are
excluded from your income unless there are contributions in excess of the
applicable limit. Employer contributions within these limits will not be
included on your Form W-2.
Employee Contributions.--You may contribute the smaller of $2,000 or 100%
of your compensation to an ▇▇▇. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered
by an employer retirement plan.
SEP Participation.--If your employer does not require you to participate in
a SEP as a condition of employment, and you elect not to participate, all
other employees of your employer may be prohibited from participating. If
one or more eligible employees do not participate and the employer tries to
establish a SEP for the remaining employees, it could cause adverse tax
consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Elective SEP
or other SEP. However, if you work for several employers, you may be
covered by a SEP of one employer and a different SEP or pension or profit-
sharing plan of another employer.
SEP-▇▇▇ Amounts--Rollover or Transfer to Another ▇▇▇.--You can withdraw or
receive funds from your SEP-▇▇▇ if within 60 days of receipt, you place
those funds in another ▇▇▇ or SEP-▇▇▇. This is called a "rollover" and can
be done without penalty only once in any 1-year period. However, there are
no restrictions on the number of times you may make "transfers" if you
arrange to have these funds transferred between the trustees or the
custodians so that you never have possession of the funds.
Withdrawals.--You may withdraw your employer's contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 592, you may be subject to
a tax on early withdrawal.
Excess SEP Contributions.--Contributions exceeding the yearly limitations
may be withdrawn without penalty by the due date (plus extensions) for
filing your tax return (normally April 15), but is includible in your gross
income. Excess contributions left in your SEP-▇▇▇ account after that time
may have adverse tax consequences. Withdrawals of those contributions may
be taxed as premature withdrawals.
Financial Institution Requirements.--The financial institution where your
▇▇▇ is maintained must provide you with a disclosure statement that
contains the following information in plain, nontechnical language:
1. The law that relates to your ▇▇▇.
2. The tax consequences of various options concerning your
▇▇▇.
3. Participation eligibility rules, and rules on the
deductibility of retirement savings.
4. Situations and procedures for revoking your ▇▇▇, including
the name, address, and telephone number of the person
designated to receive notice of revocation. (This
information must be clearly displayed at the beginning of
the disclosure statement.)
5. A discussion of the penalties that may be assessed because
of prohibited activities concerning your ▇▇▇.
6. Financial disclosure that provides the following
information:
a. Projects value growth rates of your ▇▇▇ under various
contribution and retirement schedules, or describes the
method of determining annual earnings and charges that may
be assessed.
b. Describes whether, and for when, the growth projections
are guaranteed, or a statement of the earnings rate
and the terms on which the projections are based.
c. States the sales commission for each year expressed as a
percentage of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
