SEP-IRA Plans

What is a SEP-IRA?

A SEP-IRA (Simplified Employee Pension) is an easy to administer retirement plan for anyone who is self-employed, owns a business, employs others, or earns freelance income.

Who can participate?

Any employer, including self-employed individuals, can establish a SEP.

Which employees are eligible to participate in my SEP plan?

Employees must be included in the SEP plan if they have:

attained age 21;
worked for your business in at least 3 of the last 5 years;
received at least $750 in 2022; $650 in 2021 and 2022; $600 in compensation (in 2016 - 2020) from your business for the year.

Your plan may use less restrictive requirements, for example age 18 or three months of service, to determine which employees are eligible.

Employer contribution limits

You can contribute up to 25% of the employee's total compensation or a maximum of $69,000 for the 2024 tax year or $66,000 for the 2023 tax year, whichever is less.
If you're self-employed, your contributions are generally limited to 20% of your net income. (Net compensation for self-employed individuals is generally the net profit from IRS Schedule C reduced by the deductible self-employment tax. The eligible compensation limit, indexed for inflation by IRS is $345,000 for 2024 or $330,000 for 2023).
Contributions are deductible and aren't required every year.
Contributions must be the same for employers and employees up to the specified limit.

Employee contribution limits

Unlike other plans, employees can’t defer their salary to make contributions to a SEP-IRA. They may be able to make traditional IRA contributions to the SEP-IRA of up to $7,000 ($8,000 for employees age 50 or older) for the 2024 tax year.
This amount is the total contribution allowed by the IRS that employees can make to all their IRAs (SEP, traditional, or Roth) each year.

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