A Simplified Employee Pension Individual Retirement Account (SEP IRA) is a retirement account designed for small business owners with less than 25 employees, self-employed individuals and their employees. The employer can make contributions to retirement accounts that belong to themselves and their employees.
Contributions made to SEP IRAs are deductible for the employer. Employees, which also include the employer if self-employed, have the option to make additional annual Traditional IRA contributions to the same account.
To open a SEP IRA account, you must meet the following requirements:
- The employer must cover all employees over the age of 21 who meet a minimum income requirement.
- Employees must have worked at the company during any three of the preceding five years.
- Employees must have received at least $650 in 2022 and and $750 in 2023 in compensation from the employer.
Is a SEP IRA account right for you?
SEP IRAs offer the benefits of an employer-sponsored plan to self-employed individuals without the complicated administration of a typical retirement plan. SEP IRAs don’t carry with them the same IRS reporting and recordkeeping requirements associated with more complex plans.