SEP IRAs

SEP IRAs

An SEP IRA (Simplified Employee Pension) provides business owners a simple method to contribute toward their employees’ retirement, as well as their own retirement savings.

Features

  • Earnings grow on a tax-deferred basis.
  • Self-employed individuals can maintain an SEP even if they participate in a retirement plan provided by a second employer.
  • Contributions by employers generally qualify as a business expense resulting in tax savings but are limited by annual income and compensation.
  • An SEP IRA account follows the same investment, distribution, and rollover rules as traditional IRAs.

Maximum Contribution

  • Employees cannot make contributions to the SEP plan.
  • 2014 Maximum Contribution for Employers: $52,000 or 25% of the employee’s compensation for 2014, whichever is less.
  • Contributions are made to an Individual Retirement Account or Annuity set up for each plan participant.
  • Contributions must be made by an employer’s tax-filing date, including extensions.

Eligibility

  • Distribution is taxable and is required by April of the year after a participant becomes age 70½*.

An SEP IRA offers substantial financial benefits to business owners while helping employees plan for their retirement.

*There is a 50% excess accumulation tax on any required distribution not taken by the due date.

The above information is provided for educational purposes and is not intended as tax advice. Please consult a tax professional.