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.