SARSEP CHECkLIStSARSEP CHECkLISt

this checklist isn’t a complete description of all plan                             For Business Owner’s Use 
requirements, and shouldn’t be used as a substitute for                             (DO nOt SEnD tHIS WORkSHEEt tO tHE IRS)
a complete plan review.

Every year it’s important to review the requirements for operating your Salary Reduction Simplified Employee 
Pension (SARSEP) plan. Use this checklist to help you keep your plan in compliance with many important rules. 
For additional information (including examples) on how to find, fix and avoid each mistake click on “(More).”  
See www.irs.gov/retirement and click on “types of Retirement Plans” for Fix-It Guides and other resources for 
SARSEPs and other plan types.  

1. Was your SARSEP established prior to                           6. Do 50% or more of all eligible
January 1, 1997, and subsequently                                 employees make elective deferrals?
amended for current law?                                          At least half of your eligible employees must make elective 
No new SARSEPs can be established after 1996, however,            deferrals to the SARSEP. 
existing plans need to be updated for new law.                    (More)
(More)
                                                                  7.Are total contributions (employee
2. Do you have 25 or fewer eligible                               elective deferrals and nonelective 
employees?                                                        employer contributions) limited as 
Only businesses with 25 or fewer eligible employees can           required by the Internal Revenue Code?
contribute to a SARSEP.                                           For 2018 contributions are limited to the lesser of 25% of 
(More)                                                            compensation or $55,000. SARSEPs don’t permit employers to 
                                                                  make matching contributions to participants’ accounts. 
                                                                  (More)
3.Are all eligible employees (those who
are at least age 21, worked for you in at 
least 3 of the last 5 years and have                              8. Did you deposit employee elective
received at least $600 during the year in                         deferrals timely?
compensation) participating in the plan?                          Employee elective deferrals must be remitted to the 
Employees of other businesses you or your family members          appropriate financial institution as soon as possible, but no 
own may have to be treated as employees when determining          later than 15 days following the month in which the employee 
who is an eligible employee under the SARSEP.                     would have otherwise received the money. 
(More)                                                            (More)

4.Are you determining each eligible                               9. Did the SARSEP pass the annual
employee’s compensation using the                                 deferral percentage test?
definition in your SARSEP document?                               The amount deferred each year by each highly 
A plan’s definition of compensation must satisfy applicable       compensated employee as a percentage of pay (the deferral 
rules for determining the amount of contributions.                percentage) can’t exceed 125% of the average deferral 
(More)                                                            percentage of all eligible nonhighly compensated employees. 
                                                                  (More)
5.Are all employee elective deferrals
within the Internal Revenue Code                                  10. Have you made required top-heavy
Section 402(g) limit for the calendar                             minimum contributions to the SARSEP?
year ($18,500 in 2018) and have any                               Refer to your plan document for information. Most plans are 
excess deferrals been distributed?                                deemed top-heavy, but some plans require annual testing. 
Employees age 50 or over may make additional catch-up             (More)
contributions of up to $6,000 in 2018 
(More)

If you answered “no” to any of the above questions, you may have a mistake in the operation
of your SARSEP plan. this list is only a guide to a more compliant plan, so answering "Yes" to each question may not 
mean your plan is 100% compliant. Many mistakes can be corrected easily, without penalty and without notifying 
the IRS.  
■ contact your tax advisor            ■ visit the IRS at www.irs.gov/retirement              ■ call the IRS  at 877-829-5500
          Publication 4286 (Rev. 8 -2018)  Catalog Number 37998P  Department of the Treasury Internal Revenue Service www.irs.gov