Business owners can provide retirement benefits to their employees with a SEP-IRA plan. A SEP-IRA allows eligible employees (and self-employed individuals) to enjoy all the benefits of a Traditional IRA, but with higher contribution limits.
Features & Benefits
- Employers get a tax deduction for all contributions to a SEP
- Money contributed to a SEP-IRA belongs to the employee immediately
- Contributions limits are higher than with other types of IRAs
- Monies are invested tax-deferred
- Funds in a SEP can be invested the same way as any other IRA
- Any employer with one or more employees, including sole proprietorships, partnerships, corporations, Subchapter S corporations and non-profit organizations
- Anyone earning self-employed income by providing a service, even if he/she is covered by a retirement plan at his/her full-time job
How Does it Work?
The plan is first established by an employer, who then makes tax-deductible contributions on behalf of all eligible employees into separate SEP-IRA accounts.
Account Fees & Minimums
Vary based on investment choices
|Employers||Can contribute a maximum of 25% of eligible compensation -- up to $51,000 for 2013 and up to $52,000 for 2014.|
|Self-employed||Limit is based on net-profit from the business|
- The same percentage must be used for each eligible employee, including the employer
- Contributions in excess of the stated limits are subject to a non-deductible penalty tax of 6% of the excess amount contributed
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