Contents Important Changes for 1999  ............. 1 Important Reminders  ......................... 2 Introduction  ........................................ 2 Definitions You Need To Know  ........ 3 Simplified Employee Pension (SEP) 5 Setting Up a SEP  ........................... 5 How Much Can I Contribute?  ......... 5 How Much Can I Deduct?  .............. 6 Salary Reduction Simplified Employee Pension (SARSEP) . 6 Distributions (Withdrawals)  ............. 7 Additional Taxes  ............................. 7 Reporting and Disclosure Requirements ........................... 8 SIMPLE Plans  ..................................... 8 SIMPLE IRA Plan  ........................... 8 SIMPLE 401(k) Plan  ....................... 10 Qualified Plans (Keogh Plans)  .......... 10 Kinds of Plans ................................. 10 Setting Up a Qualified Plan  ............ 10 Minimum Funding Requirements .... 11 Contributions ................................... 11 Employer Deduction  ....................... 12 Elective Deferrals (401(k) Plans) .... 13 Distributions .................................... 14 Prohibited Transactions  .................. 15 Reporting Requirements  ................. 16 Qualification Rules  .......................... 16 Appendix—Rate Table, Rate Worksheet, and Deduction Worksheet for Self-Employed Individuals With Qualified or SEP Plans  ............................................. 18 How To Get More Information  .......... 20 Index  .................................................... 21 Important Changes for 1999 Hardship    distributions    are    not    eligible rollover   distributions. Certain   hardship distributions   from   a   401(k)   plan   or   tax- sheltered annuity plan (section 403(b) plan) that occur after 1998 cannot be rolled over into an IRA or other eligible retirement plan. They are subject to the 10% additional tax on premature  distributions.  However,  they  are not subject to the 20% withholding tax that generally applies to eligible rollover distribu- tions that are not transferred directly to an- other retirement plan or IRA. The IRS has made application of this new rule optional for 1999. For more information, see Notice 99–5 in Internal Revenue Bulletin No. 1999–3. Safe   harbor   401(k)   plans. Beginning   in 1999, a 401(k) plan under which participants receive a certain level of matching or none- lective contributions does not have to pass the special nondiscrimination tests that apply to elective deferrals and matching contribu- tions. For   more   information,   see   Notice 98–52    in    Internal    Revenue    Bulletin    No. 1998–46. Department of the Treasury Internal Revenue Service Publication 560 Cat. No. 46574N Retirement Plans for Small Business (SEP, SIMPLE, and Keogh Plans) For use in preparing 1999  Returns