Simplified Employee Pension (SEP) IRAs

A Simplified Employee Pension (SEP) IRA* is an easy-to-setup and easy-to-administer retirement plan. There’s minimal paperwork and no annual reports to the IRS. There are generous funding limits, and contributions are fully tax-deductible.

Because of the plan’s simplicity, affordability and flexibility (contributions can be stopped or started at any time) the SEP is great for small businesses, professionals and self-employed people. Of course, certain rules do apply:

1. Employees cannot contribute personally. Only employer contributions are permitted. If employee participation is important, consider the SIMPLE IRA instead of the SEP-IRA.
2. SEP plans cannot discriminate. Employees must receive equal percentage contributions.
3. A SEP plan must cover anyone:
   • who is 21 years old;
   • who has worked for the employer for three of the past five years; and
   • who has earned at least $550 for the year. (A plan may be less restrictive. It cannot be more restrictive. All contributions are immediately and 100 percent vested.)