What is a Simplified Employee Pension (SEP) IRA?
• SEP IRAs were created for self-employed individuals and smaller companies. Employers can make tax-deductible contributions to SEP IRAs for eligible employees. For more information regarding eligibility, reference IRS Publication 590 [PDF – 448.6K] or IRS Publication 560 [PDF – 218.9K]. • SEP contributions are limited to 15% of your annual income, not to exceed $40,000. Effective for years beginning on or after January 1, 2002, as a result of EGTRRA, the maximum amount of compensation that may be taken into account for various plan purposes is raised to $200,000, with potential COLA increase thereafter in $5,000 increments. • Each year the IRS sets a limit on the total compensation amount that your employer can consider. Example: In 1997, only $160,000 of compensation was considered for maximum contributions, so this brings the current maximum contribution to $24,000 (15% of $160,000). • Transfers may be made to this account from Traditional, Rollover, SEP or SIMPLE IRAs and qualified
