Simplified Employee Pension (SEP) FAQs
Simplified Employee Pension Plans (SEPs) allow employers to set up a type of individual retirement account, known as a SEP IRA, for themselves and their employees.
Not intended as tax advice. Please consult a tax professional.
- What is a SEP Plan?
- Simplified Employee Pension Plans (SEP's) are a way for employers to offer a low cost retirement savings plan. Under an SEP Plan, the self-employed person makes a contribution to his or her traditional IRA, and to those of his or her employees, if any.
- Who can establish a SEP plan?
- Self-employed persons, sole proprietors, partnerships, small businesses, government agencies, and corporations are eligible for SEP plans.
- This is true even if a self-employed person also has a traditional employer.
- SEP's are most common among smaller employers because of the simplicity of the plan.
- What is the maximum IRA contribution under a SEP plan?
- The employer sets the contribution rate, which is the percentage by which the employee's compensation is multiplied to determine the SEP contribution.
- What is the deadline for making SEP contributions?
- The deadline for making SEP contributions is the employer's tax return due date, including extensions.