Life and Death Planning for Retirement Benefits

406



The plan must prohibit the assignment or alienation of benefits (the “

anti-alienation

rule

”).

See

A),

A).



The plan must contain provisions required by REA. See

Roth IRA. See

8.3.13

SEP-IRA, SIMPLE

Simplified Employee Pensions (SEP-IRAs, or SEPs) and Simple Retirement Accounts

(SIMPLEs) are employer-funded IRAs (

¶ 8.3.08

). SEPs are created unde

SIMPLEs are

created under

These plans were designed by Congress to be retirement plans that a small

business could adopt without having to hire a lawyer.

From the point of view of the estate planner advising an individual SEP-IRA or SIMPLE

participant or beneficiary, the rules are generally the same as the rules for “regular” (traditional)

IRAs, with the following exceptions:

The premature distributions penalty for a distribution from a SIMPLE is increased to 25

percent in case of distributions within the first two years of participation in a salary reduction

(elective deferral;

arrangement; see

and

Employer contributions

(including the employee’s contributions via elective deferral) to a SEP-IRA or SIMPLE have no

effect on the participant’s personal IRA contribution limits.

As employer-funded plans, SEPs and SIMPLEs may be subject to ERISA requirements

that otherwise do not apply to IRAs. ERISA aspects of these and all other plans are beyond the

scope of this book.