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The Janus Advantage

A Salary Reduction SEP-IRA is a tax-deferred retirement plan provided by small businesses with fewer than 25 employees. Both the employees and the employer can make contributions to SARSEP-IRAs. The contributions are made pre-tax through salary reduction and grow tax-deferred along with any investment earnings until distribution, usually at the time of retirement.

While the tax laws do not permit employers to establish new SARSEP plans, new employees may be added to an existing plan.

SARSEP-IRAs are subject to the same rules that govern a Traditional IRA.

Tax features

  • Employees can make pre-tax contributions to their IRAs through salary reductions each year.
  • All your investments are tax-deferred until you withdraw the money from your account.

Contribution details

  • The employer contribution to the account may not exceed the lesser of 25% of the employee's compensation or $52,000 for 2014 and $53,000 for 2015.
  • Employee contributions typically comply with employee salary reduction agreements and must not exceed $17,500 for 2014 and $18,000 for 2015.
  • Catch-up contributions 2014 apply if the employee is 50 or older by the end of the calendar year. There is a maximum catch-up contribution of $5,500 for 2014 and $6,000 for 2015.
  • In addition, the employee may use this same account to make annual IRA contributions. For 2014 and 2015, the maximum IRA contribution is $5,500. Catch-up contribution of $1,000 may be available to individuals age 50 or older.
  • If you and your spouse are covered by a workplace retirement plan, please refer to our Traditional IRA tax deductibility table.

Contribution deadlines

  • Salary reductions contributions are made for the specific year from which your paycheck was reduced.
  • Employees may also make annual IRA contributions by the employee's tax filing deadline excluding any extensions, usually April 15th of the year following the year for which the contribution is being made.
  • Employer contributions may be made through the tax filing deadline of the employer including any extensions.

Making withdrawals

  • Generally distributions from a SARSEP-IRA are taxable.
  • No penalties on withdrawals after age 59 ½ . Taking money out of your SARSEP-IRA prior to age 59 ½ may result in a 10% early withdrawal penalty and the money is taxed as current income.
  • Your SARSEP-IRAs investment earnings will be taxed at your current tax rate during the year money is withdrawn.
  • The tax-deductible contributions in your account will also be taxable at your current rate when money is (or assets are) withdrawn.
  • Any IRA contributions that were not tax-deductible should not be taxable when withdrawn from your account.
  • If you need to remove money prior to 59 ½ , check to see if any of these exceptions to the penalty apply.

Required minimum distributions

  • You must begin removing money from your account by April 1st of the year after the year you reach age 70 ½.
  • Failing to take the minimum distribution will result in a 50% penalty tax on the amount you should have withdrawn-and you still need to withdraw that amount and pay any income taxes due.
  • Learn more about Required Minimum Distributions (RMDs).
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Tomoko Kotaka

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Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus , or if available, a summary prospectus containing this and other information. Read it carefully before you invest or send money.

A IRA should be considered a long-term investment. IRAs generally have expenses and account fees, which may impact the value of the account. Non-qualified withdrawals may be subject to taxes and penalties. Maximum contributions are subject to eligibility requirements. Depending on your eligibility, you may not be able to contribute the maximum amount. For more detailed information about taxes, consult IRS Publication 590 or your tax adviser regarding your personal circumstance.

With certain limited exceptions, the funds are generally available only to shareholders residing in the United States and employees of Janus or its affiliates. For purposes of this policy, the Funds require that a shareholder and/or entity be a US citizen residing in the United States or a U.S. Territory (including overseas U.S. military or diplomatic addresses) or a resident alien residing in the United States or a U.S. Territory with a valid U.S. Taxpayer Identification Number to open an account with the Fund. Nothing on this website should be considered a solicitation to buy or an offer to sell shares of any Janus fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.

If you are a non-US citizen or non-US resident, please see the international funds section of this site.

Tax information contained herein is not intended or written to be used, and it cannot be used by taxpayers for the purposes of avoiding penalties that may be imposed on taxpayers. Such tax information and any estate planning information is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice.

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