Simplified Employee Pensions (SEPs) and SIMPLE Plans

Are You Eligible?

Only an employer can establish a SEP arrangement. In order to sponsor a SEP, you can either be in business by yourself or have employees. If you have eligible employees, you must fund the SEP on their behalf; i.e., you must make contributions to the SEP plan for your eligible employees. You, as the employer, are also responsible for establishing and maintaining the plan.

The participation requirements for a SEP are generally broader than those for Keogh plans. An eligible employee for a SEP is one who meets these conditions:

  • Is at least 21 years old
  • Has performed service for you in at least three of the immediately preceding five years
  • Receives a minimum amount of compensation set annually ($600 in 2019 and 2018) by the IRS

IMPORTANT NOTE: Because of the less restrictive participation rules (see above), SEPs are typically less popular for employers than other retirement plans.

Supercharging Your IRA

A SEP is better than an IRA because an IRA allows you to put away only up to $6,000 in 2019 ($5,500 in 2018). SEPs are IRAs that an employer sets up for its employees as part of a retirement plan. Like a qualified plan, SEPs are subject to overall contribution limitations (similar to a Keogh plan).

Share Article:
Add to GooglePlus

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Heartland Bank and Heartland Planning Associates are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Heartland Planning Associates, and may also be employees of Heartland Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Heartland Bank and Heartland Planning Associates. Securities and insurance offered through LPL or its affiliates are:

Not Insured by FDIC of Any Other Government Agency Not Bank Guaranteed Not Bank Deposits or Obligations May Lose Value

BrokerCheck