Self-Directed SEP IRA: Simplified Employee Pension  

A SEP IRA (Simplified Employee Pension) plan is a retirement savings program for businesses and their owners. SEP IRAs cover multiple businesses entities, sole employee businesses, owner-only businesses, and larger businesses with up to 100 employees.   

SEP IRAs are designed similarly to Traditional IRAs in that contributions are tax-deductible, and investments grow tax-deferred until retirement, upon which distributions are taxed as income.   

How a SEP IRA Works  

A SEP IRA is an attractive option for many business owners because it does not have the setup and operating costs like most conventional employer-sponsored retirement plans. Many employers also set up a SEP plan to contribute to their retirement at higher amounts than a Traditional IRA allows. Workers can also start a SEP for their self-employed business even if they participate in an employer’s retirement plan at a second job. 

SEP IRAs are treated similarly to Traditional IRAs for tax purposes and allow the same investment options. The same transfer and rollover rules that apply to traditional IRAs also apply to SEP IRAs. When an employer makes contributions to SEP IRA accounts, it receives a tax deduction for the amount contributed. 

Learn more about the other business-backed accounts that Accuplan offers here.

How Does Accuplan Improve the SEP IRA?  

Accuplan allows you to do more with a SEP IRA. Most retirement accounts, be it a Roth, Traditional, or SEP IRA, rely on stocks and bonds as the investment option. The IRS allows many more asset types than simply stocks and bonds.  

With Accuplan Benefits Services, you can set up a self-directed SEP IRA and invest intangible assets like real estate or gold or paper assets like private equity or loans. A self-directed retirement account allows you to take control of your retirement account and invest in what you want. With us, the possibilities are endless. 

Open a SEP IRA today and begin investing with the premier self-directed IRA provider.  

Contributions to SEP IRAs  

Business owners can contribute up to $58,000 per year to their own IRA.   

The employer may also match contributions, up to 25 percent of each employee’s compensation, or $58,000, whichever amount is less. 

SEP IRA Advantages Include  

Contributions to a SEP IRA are tax-deductible to the company, and the company pays no taxes on the earnings inside those SEP IRAs. No IRS filings are required from the company.    

SEP plans allow company contributions for employees who are older than age 70 1⁄2.    

A Simplified Employee Pension is easier and less expensive to set up and operate than other company retirement plans, all while being much more powerful and flexible. 

SEP IRA Eligibility  

Any individual can open a SEP IRA and make contributions if the eligibility requirements are met.    

  • Eligible plan participants are over the age of 21 
  • Worked for the business for 3 of the last five years; and    
  • Has earned at least $600 in salary annually    

Note that if the owner employs individuals that the IRS deems eligible, the business owner must contribute to the IRA on their behalf. Those contributions must be an equal percentage of compensation to the business owners.   

Establishing a SEP IRA with Accuplan  

  1. Open an account with Accuplan here
  2. Execute a Written Agreement that the SEP will provide benefits to all eligible employees 
  3. Provide employees with all the information and specifics about the agreement 
  4. Set up an IRA account for each employee 
  5. The Written Agreement  

According to the IRS, this agreement will include the name of the employer, the requirements for participation, the signature of the responsible official, and a definite allocation formula.    

The IRS has a model SEP plan document, Form 5305-SEP, Simplified Employee Pension – Individual Retirement Accounts Contribution Agreement PDF. Note that this form is not filed with the IRS.

Frequently Asked Questions

Self-employed individuals or small businesses structured as sole proprietorships, partnerships, C corporations, and S corporations can establish and contribute to a SEP IRA.

Employers can customize eligibility requirements within limits and can change them from year to year.

To be eligible, an employee must:

  • Reached age 21
  • Performed services for your business in 3 or more of the last five years
  • Received at least $600 in compensation from your business during the current year

Excludable employees are those that:

  1. Are covered under collective bargaining agreements
  2. Non-resident aliens that did not earn U.S. sourced income
  3. Employees who receive less than $450 in compensation

The owner/employer is also considered an employee and must meet the same eligibility requirements.

For any contributions to be made, the business must include all eligible employees.

Yes, you can contribute to both a SEP IRA and either a traditional IRA or Roth IRA (presuming you meet income limit requirements) in the same year. The SEP-IRA contribution may impact the deductibility of traditional IRA contributions.

The maximum contribution is 25% of compensation. The definition of compensation differs with the business structure. All eligible employees must receive the same percentage of compensation.