Simplified Employee Pension (SEP) IRA

A Simplified Employee Pension Plan, or SEP IRA, is a type of employer-sponsored retirement savings plan that allows employers and their employees to increase the amount they can save for retirement.

The SEP IRA may be a great option if you are a self-employed individual or small business owner because it allows you to take a potential tax deduction equivalent to the contributions made into the SEP IRA each year. This tax deduction is subject to government guidelines.

The rules governing a SEP plan are not as complicated as a 401(k) plan and the plan types have a few similar benefits. Contributions to a SEP IRA are tax deductible, and earnings within the account are tax-deferred until withdrawn, just like a 401(k) plan. This means that any earnings in these accounts grow without having to be included in your annual taxable income. Only when the funds are withdrawn from the account as a distribution will taxes potentially apply.

Key Features

• Tax-deferred
  Funds are tax-deferred while in the account, which means that you do not have to pay taxes until the funds or assets are withdrawn from the account.

• Tax deductions
  Contributions to a SEP IRA may be tax deductible by a business, provided the employer meets certain requirements.

• Employee retention
  A SEP plan may encourage employee retention by providing the team with an additional benefit to assist them in saving more for retirement.

• Longer contribution period
  Employees can continue to receive SEP contributions past age 72, as long as they meet the requirements of the employer’s SEP plan agreement.

NOTE: Please visit www.irs.gov for complete rules and regulations regarding SEP plans. Certain restrictions apply regarding prohibited transactions.

Frequently Asked Questions

about SEP IRAs