SEP and SIMPLE Plans

SEP Overview

A Simplified Employee Pension (SEP) Plan is one of the easiest retirement plans for self-employed individuals and small companies to administer. A SEP does not have the start-up and operating costs associated with a conventional retirement plan.

With a SEP, business owners can help employees save for retirement, while taking advantage of the tax savings on contributions. The employer simply makes contributions to an IRA opened by the employee.

A SEP may be a good option for:

• A business that doesn't have a defined profit pattern, or
• A business looking for contribution flexibility each year.

To find out how much can be contributed, visit our plan limits page.

For more information about SEP IRAs and other retirement plans, visit our Frequently Asked Questions.

SIMPLE IRA Overview

In 1996, Congress created the Savings Incentive Match Plan for Employees (SIMPLE). The SIMPLE is a retirement plan funded by employee pre-tax salary deferrals and required employer contributions. A SIMPLE IRA provides employees with the benefits of a salary deferral program combined with the investment flexibility of a self-directed IRA. There are no top-heavy rules or discrimination tests required. Employees can reduce their current taxable earnings, while saving for retirement.

This plan was designed for Sole Proprietors, Partnerships, and Corporations with 100 or fewer eligible employees. Employees may defer part of their annual compensation to the plan, and employers are required to make a contribution in one of two ways:

• 2 percent of compensation to all eligible employees, or
• 100 percent match on employee deferrals up to 3 percent of compensation (with some flexibility)

To find out how much can be contributed, visit our plan limits page.

For more information about SIMPLE IRAs and other retirement plans, visit our Frequently Asked Questions.