A Simplified Employee Pension (SEP) IRA is a retirement savings plan established by employers – including self-employed people – for the benefit of their employees and themselves. Employers may make tax-deductible contributions on behalf of eligible employees to their SEP IRAs. Many employers will set up a SEP IRA plan so they can contribute to their own retirement at higher levels than a traditional IRA allows.

The Facts

SEP IRAs are tax-deferred accounts and they have the same investment options as traditional IRAs.

  • SEP IRAs are treated like traditional IRAs for tax purposes, which means the same transfer and rollover rules apply
  • When an employer makes contributions to SEP IRA accounts, they will receive a tax deduction for the amount contributed.
  • As a business owner, you are not locked into an annual contribution amount for your SEP IRA plan. Decisions about whether to contribute and how much to contribute can change from year to year.
  • You can start a SEP IRA plan for your business even if you participate in an employer’s retirement plan at a second job

Who Can Participate?

  • An individual must be at least 21 years old, have worked for the employer in at least three of the last five years, and have received a minimum of $600 in compensation from the employer during the current year to qualify.
  • Individual employers can be less restrictive in their qualification requirements, but not more restrictive than the IRS
  • Employers may exclude certain types of employees from participating in a SEP IRA, even if they would otherwise be eligible based on the plan’s rules
  • Workers who are covered in a union agreement that bargains for retirement benefits can be excluded.
  • Workers who are non-resident aliens can also be excluded as long as they do not receive US wages or other service compensation from their employer


  • Easy to set up
  • Low administrative costs
  • Allow an employer to determine how much to contribute each year
  • Allow higher annual contributions than standard IRAs
  • Employer contributions are vested immediately
  • Does not come with many of the start-up and operating costs of most conventional employer-sponsored retirement plans

Contribution Limits For 2020

  • Contributions cannot exceed 25% of the employee’s compensation for the year OR contributions cannot exceed $57,000
  • This contribution limit is significantly higher than the $6,000 limit imposed on standard IRAs
  • The deadline for making contributions is the tax filing deadline (plus extensions) of the company or the self-employed individual who set up the SEP IRA

A SEP IRA can help you better prepare for your retirement. At Active Wealth, we know that, as a business owner, you will get one check to last the rest of your life when you retire. We want you to have enough money to live comfortably and enjoy your retirement and we don’t want you to outlive your money. If you want to learn how you can set up a SEP IRA and start enjoying tax-deferred growth on your hard-earned money, click on this link to set up a free consultation with Ford or Brandy: https://activewealth.com/consult/.

You can also find more detailed information on SEP IRAs here: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps.


Active Wealth Management is a private wealth management firm located in Atlanta, GA. Our team is passionate about educating clients in order to empower them to invest and retire successfully and we believe in managing our client’s assets actively. Active Wealth Management works with three primary groups of people; pre-retirees, retirees, and business owners. 

Active Wealth Management is led by our Founder and President, Ford Stokes, and by our Senior Vice President, Brandy Seats. They aim to help clients understand their current financial situation, analyze their current portfolio, and develop a customized financial plan to accomplish their goals. If you would like more information about the firm, please visit our website, https://activewealth.com, or call our office at (770) 685-1777. You will not be passed off to another advisor. You will meet with either Ford or Brandy. You can schedule directly into their calendars at https://activewealth.com/consult/.