Simplified Employee Pension (SEP) IRA

What is a Simplified Employee Pension Plan?

A simplified employee pension (SEP) plan is a retirement plan established by an employer. Each year, the employer can contribute a certain percentage of each eligible employee’s compensation directly to the employee’s traditional IRA.

Am I Eligible for a SEP Plan?

As a business owner, whether incorporated or not, you may establish a SEP plan. Sole proprietors and partnerships can have SEP plans, even if there are no employees. However, if you currently maintain a qualified retirement plan, you cannot establish the Internal Revenue Service (IRA) model SEP plan for your business.

What is the Maximum SEP Contributions?

Under the IRS model SEP plan; you must contribute a uniform percentage of compensation for each eligible employee. The maximum contribution is the lesser of the contribution amount or 25 percent of each employee’s compensation.

Is it Difficult to Establish a SEP Plan?

No. To establish an IRS model SEP plan, you must complete an IRS-approved form, provide a coy to each eligible employee and instruct each of them to establish a traditional IRA.

Work with a Telhio Member Service Representatives to discuss restrictions and other contribution guidelines. The deadline for establishing or contributing to a SEP plan is your business’s income tax-filing deadline, including extensions.  You should consult your tax or legal profession prior to establishing a SEP plan for your business

This information is intended to provide general information on federal tax laws governing simplified employee pension plans. It is not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to an employer’s individual circumstances.