A SEP is a written plan that allows self-employed individuals to make retirement contributions on their own behalf and on behalf of their employees without the complexity of a qualified plan.

  1. SEP-IRA - Under a SEP, the self-employed individual makes contributions to a traditional IRA set up by or for each eligible employee. The SEP-IRA is owned and controlled by the employee.
  2. Eligible employee - An employee who meets all of the following requirements:
    • Age 21 or older.
    • Employed for at least three of the last five years.
    • Received at least $550 in compensation (2014, adjusted for inflation).
    • Employees covered by a union agreement may be excluded who retirement benefits were bargained for in good faith.
  3. Contribution limits - The lesser of:
    • 25% of the employee's compensation, or
    • $52,000 (2014, indexed for inflation).
    • Compensation for self-employed individual is based on net earnings, which takes into account the deduction for one half of self-employment tax and the deduction for contributions to a SEP-IRA.
  4. Deducting contributions - Contributions to a SEP are deductible up to the above contribution limits.
  5. Contribution deadline - Due date of employer's income tax return (including extensions).
  6. Deadline for setting up a plan - Due date of employer's income tax return (including extensions).


SIMPLE plans

Related Articles
  1. Retirement

    Business Owners: How To Set Up An SEP IRA

    SEP IRAs are simple to set up and run, making them a popular choice for business owners.
  2. Retirement

    Retirement Planning For The Self-Employed

    Recent studies show that most self-employed Americans are saving little, if anything, for retirement. But making an investment in yourself is worth it.
  3. Retirement

    SEP IRA Limits in 2016

    Discover the SEP IRA limits for 2016. Included is a summary, plans that would be ideal candidates for SEP IRAs, and contribution and distribution rules.
  4. Financial Advisor

    Retirement Plan Options for Small-Business Owners (SCHW, TROW)

    Small-business owners and self-employed individuals are responsible for funding their own retirement. The SEP-IRA and solo 401(k) are tools to consider.
  5. Financial Advisor

    SEP IRAs Tutorial

    Learn about the set-up, the contributions to and the distributions from this IRA-based plan to which employers may make tax-deductible contributions on behalf of eligible employees.
  6. Small Business

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  7. Retirement

    Retirement Planning for the Self-Employed

    The three retirement-savings options best suited to the entrepreneur.
  8. Financial Advisor

    The Pros and Cons of a SEP Account in Today's Volatile Markets

    Discover why you don't have to worry about a volatile market's impact on your simplified employee pension plan. Learn to use your SEP to navigate the markets.
  9. Retirement

    Self-Employed? Top Plans for Retirement Savings

    Here are 5 smart ways the self-employed can save for retirement. Some also work for your employees. But get financial advice before picking a strategy.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center