Please explain a SEP-IRA. Can a town offer its employees a SEP-IRA?
Yes, a town can offer its employees a SEP-IRA (simplified employee pension). Under a SEP, you make the contributions to an individual retirement arrangement established by or for each eligible employee. SEP-IRAs are owned and controlled by the employees, and you make contributions to a financial institution where the SEP-IRAs are maintained. A SEP-IRA is set up for, at a minimum, each eligible employee. The SEP rules permit you to contribute a limited amount of money each year to each employee’s SEP-IRA. You do not have to make contributions every year. But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees. When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, even employees who died or terminated employment before the contributions were made. Your contributions to a SEP, to a
