SEP Simplified Employee Pension
What Is a SEP Simplified Employee Pension (SEP)?
A simplified employee pension (SEP or SEP IRA) is a retirement plan that an employer or self-employed individuals can establish. The employer is allowed a tax deduction for contributions made to the SEP plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
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Additionally, under the new Setting Every Community Up for Retirement Enhancement (SECURE) legislation, which was enacted on December 20, 2020,2 small employers will get a tax credit to offset the costs of starting a 401(k) plan or Savings Incentive Match Plan for Employees (SIMPLE) IRA plan with auto-enrollment on top of the start-up credit they already receive.3
SEP IRAs often have higher annual contribution limits than standard IRAs.4 Fundamentally, a SEP IRA can be considered a traditional IRA with the ability to receive employer contributions. One major benefit it offers employees is that employer contributions are vested immediately.
Employee contribution limits
Employees may be able to make traditional IRA contributions to the SEP-IRA of up to $6,000 ($7,000 for employees age 50 or older) for the 2020 tax year.
This amount is the total contribution allowed by the IRS that employees can make to all their IRAs (SEP, traditional, or Roth) each year.
California Business Benefits has a business alliance with a very reputable RIA advisory firm, The Financial Management Network, Inc. All securities transactions are carried out through FMN. http://www.fmncc.com/