Simplified Employee Pension (SEP) IRA

Contribution guidelines

A Simplified Employee Pension (SEP) plan is ideal for self-employed individuals and small businesses.

• Contributions¹ are made to the participant’s Traditional IRA²
• Employer contributions are deductible by the employer
• Employer contributions are discretionary

As an employer, you may set the following employee eligibility requirements or you can choose to be less restrictive and not include some of the requirements below.

• Employees must be at least 21 years old
• Employees must have worked three of the immediately preceding five years
• Employees must earn at least $650 in compensation
• Employees must not be covered by a collective bargaining agreement
• Employees who are nonresident aliens with no U.S. income are excluded
• Eligibility requirements must apply to all employees, including the business owner

Only employer contributions are allowed in an SEP plan and must be made on behalf of all eligible employees.

• Each employee must establish a Traditional IRA
• Contributions must be made by the business’ federal tax return due date, to include extensions
• Contribution limits per employee is the lesser of:

• 25% of the employee's compensations (up to a defined compensation cap) or
• A set dollar amount ($61,000 for 2022)
  
   

SEP plan contributions and earnings are tax-deferred³ and subject to the same rules as Traditional IRAs to include moving, withdrawing,⁴ or converting assets.

To learn more, contact us today by calling 915.774.6879, toll-free at 1.800.772.4328, ext. 6879.