Does SEP Plan participation affect IRA contributions?
Employees who participate in a SEP plan are considered “active participants” in an employer retirement plan. As such, the deductibility of their IRA contribution may or may not be affected, depending on their income. SEP plan participation does not, however, reduce or eliminate an employee’s ability to fund an IRA, and all IRA earnings are tax-deferred, regardless of SEP plan participation. But more important, an SEP plan offers the advantage of a contribution which is potentially much larger than an IRA contribution.
