SEP IRA FAQs

A SEP IRA (Simplified Employee Pension Individual Retirement Account) is a retirement savings plan designed for self-employed individuals and small business owners. It allows employers to make contributions to employees’ retirement accounts.

Employees are eligible to participate in a SEP IRA if they are at least 21 years old, have worked for the employer in at least three of the last five years, and have earned at least $750 in the current year (2024).

For 2024, the contribution limit for a SEP IRA is the lesser of 25% of an employee’s compensation or $66,000. Contributions are made solely by the employer.

SEP IRAs are easy to set up and maintain, with minimal administrative costs. They provide a tax-advantaged way for small business owners to contribute to their own and their employees’ retirement savings.

No, employees cannot contribute to their own SEP IRAs. All contributions are made by the employer on behalf of eligible employees.

The main differences are in contribution limits and who can contribute. SEP IRAs have higher contribution limits and only employers can contribute, while Simple IRAs allow both employer and employee contributions with lower limits.