Simplified Employee Pension (SEP)
A Simplified Employee Pension (SEP) is a tax-deferred retirement plan that is easy to administer and allows employers to make fully discretionary contributions for themselves and their employees.
Features and Benefits
- Employer contributions are deductible as a business expense and not required every year. The employer may increase, decrease, or skip annual contributions as necessary.
- An easy to set up and maintain retirement plan.
Annual Contribution Limits
- For 2018, up to 25% of the participant’s compensation or $53,000, whichever is less.
- For 2018, a personal contribution limit of up to $5,500 (or $6,500 if age 50 or older) into an individual SEP, Traditional, or Roth IRA. (All contributions to the SEP-IRA Plan are made by the employer; however, employees can contribute to their personal IRA accounts.)
- Generally, employees who are over age 21, earn at least $550 annually, and have worked for the same employer in at least three of the past five years must be allowed to participate.
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