A SEP (Simplified Employee Pension Plan) IRA is a
retirement plan for self-employed individuals and small business owners and
employees. SEP IRAs may not only be attractive to your employees, they can
also be quick and easy to set up and administer for your small business.
Consider a SEP if your business is new or has variable profits.
Key Features include simple administration, no employer tax filing, no
specific annual funding requirements, and flexible contributions.
Eligibility Requirements for Employees Employees must be age 21
or older, have earned at least $750 during 2023 and have worked three out of
the five previous years. Employers may adopt less restrictive eligibility
requirements so as not to exclude themselves from participating in the plan.
Set-Up and Funding A SEP IRA must be established and funded prior
to the employer's tax return due date, plus extension. Contributions can
vary by year. All contributions are reported in the tax year received on tax
form 5498.
Contributions
• 2023 Tax Year: Lesser of 25% of compensation or $66,000
• 2024 Tax Year: Lesser of 25% of compensation or $69,000
Employer must complete and retain Form 5305-SEP or other plan documents in
their records. Employees should receive a copy.