Simplified Employee Pension (SEP) IRAs
A Simplified Employee Pension (SEP) IRA* is an easy-to-setup and easy-to-administer
retirement plan. There’s minimal paperwork and no annual reports to the
IRS. There are generous funding limits, and contributions are fully tax-deductible.
Because of the plan’s simplicity, affordability and flexibility (contributions can be stopped or started at any time) the SEP is great for small businesses, professionals and self-employed people. Of course, certain rules do apply:
- Employees cannot contribute personally. Only employer contributions are permitted. If employee participation is important, consider the SIMPLE-IRA instead of the SEP-IRA.
- SEP plans cannot discriminate. Employees must receive equal percentage contributions.
- A SEP plan must cover anyone:
- who is 21 years old;
- who has worked for the employer for three of the past five years; and
- who has earned at least $550 for the year. (A plan may be less restrictive. It cannot be more restrictive. All contributions are immediately and 100 percent vested.)
- Contributions in 2013 may not exceed 25 percent of compensation or $51,000, whichever is less. Self-employed individuals may not contribute more than 20 percent of compensation or $51,000, whichever is less.
For more information about starting SEP or funding a SEP-IRA, contact your local Erie insurance Agent.
*Life insurance and annuity products are not available in New York. Refer to our Disclaimer for additional information.