{"id":4764,"date":"2016-04-04T10:47:41","date_gmt":"2016-04-04T15:47:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/employment-law-and-human-resources\/simplified-employee-pensions-seps.html"},"modified":"2024-06-06T05:31:47","modified_gmt":"2024-06-06T10:31:47","slug":"simplified-employee-pensions-seps","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/employment-law-and-human-resources\/simplified-employee-pensions-seps.html","title":{"rendered":"Simplified Employee Pensions (SEP-IRA): A Guide for Small Business"},"content":{"rendered":"\n
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Simplified Employee Pensions (SEP-IRA): A Guide for Small Business<\/h1>\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Susan Mills Richmond, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Simplified Employee Pensions (SEPs or SEP IRAs) are low-cost retirement plans<\/a>. Self-employed people and small business owners can use SEPs instead of more expensive retirement savings plans.<\/p>\r\n

SEPs don’t have the same startup and operating costs as traditional retirement plans. The annual allowed contributions may differ. Only the employer contributes to a SEP; yearly contributions can vary as the employer desires.<\/p>\r\n

Setting Up Your SEP IRA<\/h3>\r\n

The IRS has a convenient step-by-step form to help business owners and sole proprietors set up their SEPs. The disadvantage to using Form 5305-SEP<\/a> is that you can’t use it if you have any other qualified plans, use "leased<\/a>" employees, or want to include your Social Security contributions in your SEP contributions.<\/p>\r\n

If you can’t use Form 5305, financial institutions have prototype forms you can use to create your own SEP-IRA account. You need a qualified financial institution to act as trustee for your SEP. Banks, insurance companies, credit unions, and brokerage firms can handle your company’s SEPs.<\/p>\r\n

Each eligible employee must have a SEP. A SEP IRA vests immediately.<\/p>\r\n

Eligibility Requirements<\/h3>\r\n

Employee eligibility requirements apply to anyone wishing to take part in a SEP plan, including self-employed people and sole proprietors. To take part, an employee must meet these requirements<\/a>:<\/p>\r\n