29 Cfr 2520.104-49

Employee Benefits Security Admin., Labor
the financial report of the insurance
company, insurance service or similar
organization, provided that the administrator files a copy of such report
within 45 days of receipt of a written
request for such report by the Secretary of Labor.

cprice-sewell on DSKDVH8Z91PROD with CFR

[45 FR 14034, Mar. 4, 1980]

§ 2520.104–48 Alternative method of
compliance for model simplified
employee
pensions—IRS
Form
5305–SEP.
Under the authority of section 110 of
the Act the provisions of this section
are prescribed as an alternative method of compliance with the reporting
and disclosure requirements set forth
in part 1 of title I of the Employee Retirement Income Security Act of 1974
in the case of a simplified employee
pension (SEP) described in section
408(k) of the Internal Revenue Code of
1954 as amended (the Code) that is created by use without modification of Internal Revenue Service (IRS) Form
5305–SEP.
(a) At the time an employee becomes
eligible to participate in the SEP
(whether at the creation of the SEP or
thereafter), the administrator of the
SEP (generally the employer establishing and maintaining the SEP) shall
furnish the employee with a copy of
the completed and unmodified IRS
Form 5305–SEP used to create the SEP,
including (1) the completed Contribution Agreement, (2) the General Information and Guidelines, and (3) the
Questions and Answers.
(b) Following the end of each calendar year the administrator of the
SEP shall notify each participant in
the SEP in writing of any employer
contributions made under the Contribution Agreement to the participant’s individual retirement account or
individual retirement annuity (IRA)
for that year.
(c) If the employer establishing and
maintaining the SEP selects, recommends, or in any other way influences employees to choose a particular
IRA or type of IRA into which contributions under the SEP will be made,
and if that IRA is subject to restrictions on a participant’s ability to withdraw funds (other than restrictions imposed by the Code that apply to all

§ 2520.104–49

IRAs), the administrator of the SEP
shall give to each employee, in writing,
within 90 days of the adoption of this
regulation or at the time such employee becomes eligible to participate
in the SEP, whichever is later, a clear
explanation of those restrictions and a
statement to the effect that other
IRAs, into which rollovers or employee
contributions may be made, may not
be subject to such restrictions.
[45 FR 24869, Apr. 11, 1980]

§ 2520.104–49 Alternative method of
compliance for certain simplified
employee pensions.
Under the authority of section 110 of
the Act, the provisions of this section
are prescribed as an alternative method of compliance with the reporting
and disclosure requirements set forth
in part 1 of title I of the Act for a simplified employee pension (SEP) described in section 408(k) of the Internal
Revenue Code of 1954 as amended, except for:
A SEP that is created by proper use of
Internal Revenue Service Form 5305–
SEP, or; a SEP in connection with
which the employer who establishes or
maintains the SEP selects, recommends or influences its employees
to choose the IRAs into which employer contributions will be made and
those IRAs are subject to provisions
that prohibit withdrawal of funds by
participants for any period of time.
(a) At the time an employee becomes
eligible to participate in the SEP
(whether at the creation of the SEP or
thereafter) or up to 90 days after the effective date of this regulation, whichever is later, the administrator of the
SEP (generally the employer establishing or maintaining the SEP) shall
furnish the employee in writing with:
(1) Specific information concerning
the SEP, including:
(i) The requirements for employee
participation in the SEP,
(ii) The formula to be used to allocate employer contributions made
under the SEP to each participant’s individual retirement account or annuity
(IRA),

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§ 2520.104–49

29 CFR Ch. XXV (7–1–09 Edition)

(iii) The name or title of the individual who is designated by the employer to provide additional information to participants concerning the
SEP, and
(iv) If the employer who establishes
or maintains the SEP selects, recommends or substantially influences
its employees to choose the IRAs into
which employer contributions under
the SEP will be made, a clear explanation of the terms of those IRAs, such
as the rate(s) of return and any restrictions on a participant’s ability to roll
over or withdraw funds from the IRAs,
including restrictions that allow rollovers or withdrawals but reduce earnings of the IRAs or impose other penalties.
(2) General information concerning
SEPs and IRAs, including a clear explanation of:
(i) What a SEP is and how it operates,
(ii) The statutory provisions prohibiting discrimination in favor of highly
compensated employees,
(iii) A participant’s right to receive
contributions under a SEP-and the allowable sources of contributions to a
SEP-related IRA (SEP-IRA),
(iv) The statutory limits on contributions to SEP-IRAs,
(v) The consequences of excess contributions to a SEP-IRA and how to
avoid excess contributions,
(vi) A participant’s rights with respect to contributions made under a
SEP to his or her IRA(s),
(vii) How a participant must treat
contributions to a SEP-IRA for tax
purposes,
(viii) The statutory provisions concerning withdrawal of funds from a
SEP-IRA and the consequences of a
premature withdrawal, and
(ix) A participant’s ability to roll
over or transfer funds from a SEP-IRA
to another IRA, SEP-IRA, or retirement bond, and how such a rollover or
transfer may be effected without causing adverse tax consequences.
(3) A statement to the effect that:
(i) IRAs other than the IRA(s) into
which employer contributions will be
made under the SEP may provide different rates of return and may have
different terms concerning, among

other things, transfers and withdrawals
of funds from the IRA(s),
(ii) In the event a participant is entitled to make a contribution or rollover
to an IRA, such contribution or rollover can be made to an IRA other than
the one into which employer contributions under the SEP are to be made,
and
(iii) Depending on the terms of the
IRA into which employer contributions
are made, a participant may be able to
make rollovers or transfers of funds
from that IRA to another IRA.
(4) A description of the disclosure required by the Internal Revenue Service
to be made to individuals for whose
benefit an IRA is established by the financial institution or other person who
sponsors the IRA(s) into which contributions will be made under the SEP.
(5) A statement that, in addition to
the information provided to an employee at the time he or she becomes
eligible to participate in a SEP, the administrator of the SEP must furnish
each participant:
(i) Within 30 days of the effective
date of any amendment to the terms of
the SEP, a copy of the amendment and
a clear written explanation of its effects, and
(ii) No later than the later of:
(A) January 31 of the year following
the year for which a contribution is
made,
(B) 30 days after a contribution is
made, or
(C) 30 days after the effective date of
this regulation
written notification of any employer
contributions made under the SEP to
that participant’s IRA(s).
(6) In the case of a SEP that provides
for integration with Social Security
(i) A statement that Social Security
taxes paid by the employer on account
of a participant will be considered as
an employer contribution under the
SEP to a participant’s SEP-IRA for
purposes of determining the amount
contributed to the SEP-IRA(s) of a participant by the employer pursuant to
the allocation formula,
(ii) A description of the effect that
integration with Social Security would
have on employer contributions under
a SEP, and

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Employee Benefits Security Admin., Labor
(iii) The integration formula, which
may constitute part of the allocation
formula required by paragraph (a)(1)(ii)
of this section.
(b)(1) The requirements of paragraphs
(a)(1)(i), (ii), (iii) and (a)(6)(i) of this
regulation may be met by furnishing
the SEP agreement to participants,
provided that the SEP agreement is
written in a manner reasonably calculated to be understood by the average plan participant.
(2) The requirements of paragraph
(a)(1)(iv) of this regulation may be met
through disclosure materials furnished
by the financial institution in which
the participant’s IRA is maintained,
provided the materials contain the information specified in such paragraph.
(c) No later than the later of:
(1) January 31 of the year following
the year for which a contribution is
made,
(2) 30 days after a contribution is
made, or
(3) 30 days after the effective date of
this regulation
the administrator of the SEP shall notify a participant in the SEP in writing
of any employer contributions made
under the SEP to the participant’s
IRA(s).
(d) Within 30 days of the effective
date of any amendment to the terms of
the SEP, the administrator shall furnish each participant a copy of the
amendment and a clear explanation in
writing of its effect.

cprice-sewell on DSKDVH8Z91PROD with CFR

[46 FR 1264, Jan. 6, 1981]

§ 2520.104–50 Short plan years, deferral of accountant’s examination and
report.
(a) Definition of ‘‘short plan year.’’ For
purposes of this section, a short plan
year is a plan year, as defined in section 3(39) of the Act, of seven or fewer
months’ duration, which occurs in the
event that:
(1) A plan is established or commences operations;
(2) A plan is merged or consolidated
with another plan or plans;
(3) A plan is terminated; or
(4) The annual date on which the plan
year begins is changed.
(b) Deferral of accountant’s report. A
plan administrator is not required to
include the report of an independent

§ 2520.104–50

qualified public accountant in the annual report for the first of two consecutive plan years, one of which is a short
plan year, provided that the following
conditions are satisfied:
(1) The annual report for the first of
the two consecutive plan years shall
include:
(i) Financial statements and accompanying schedules prepared in conformity with the requirements of section 103(b) of the Act and regulations
promulgated thereunder;
(ii) An explanation why one of the
two plan years is of seven or fewer
months’ duration; and
(iii) A statement that the annual report for the immediately following
plan year will include a report of an
independent qualified public accountant with respect to the financial statements and accompanying schedules for
both of the two plan years.
(2) The annual report for the second
of the two consecutive plan years shall
include:
(i) Financial statements and accompanying schedules prepared in conformity with section 103(b) of the Act
and regulations promulgated thereunder with respect to both plan years;
(ii) A report of an independent qualified public accountant with respect to
the financial statements and accompanying schedules for both plan years;
and
(iii) A statement identifying any material
differences
between
the
unaudited financial information relating to, and contained in the annual report for, the first of the two consecutive plan years and the audited financial information relating to that plan
year contained in the annual report for
the immediately following plan year.
(c) Accountant’s examination and report. The examination by the accountant which serves as the basis for the
portion of his report relating to the
first of the two consecutive plan years
may be conducted at the same time as
the examination which serves as the
basis for the portion of his report relating to the immediately following plan
year. The report of the accountant
shall be prepared in conformity with
section 103(a)(3)(A) of the Act and regulations thereunder.
[46 FR 1265, Jan. 6, 1981]

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