SEP (Simplified Employee Pension)

Designed for self-employed individuals and small business owners (typically with up to 25 employees), the SEP allows annual contributions of up to $45,000 without getting involved in a more complex qualified plan such as a 401(k). Contributions to an SEP are tax deductible, and earnings within the account are tax free until withdrawal.

An employer may contribute up to 25% of each employee’s annual compensation with a maximum of $45,000.

Why Should I Open an SEP?

If you want to contribute the highest amounts possible toward your retirement account and qualify for the highest annual tax-deductions, then an SEP might be your best option.

Eligibility

Any employer—whether a corporation, partnership, or self-employed individual—may establish the plan, even if there's only one employee. Employees must meet ALL of these requirements:

• Be at least 21 years of age
• Have worked for the business during any three of the past five years
• Have earned the $500 annual minimum required compensation

Spouses and children may also participate in the plan and open their own SEP IRAs—as long as they're employees of the company and meet the income requirements.