Simplified Employee Pension (SEP) IRA

Small business owners can make tax-deductible contributions with this flexible plan that is easy to set up and maintain. If you have employees, you may be required to contribute for them as well. 

A Simplified Employee Pension (SEP) plan may work well if you want a low-cost, easy-to-maintain retirement plan for you and your employees. Both SEP IRA and Traditional IRA contributions can be made to the same account, and you have the flexibility to change how much your business contributes from year to year.

Here are some details: 

Eligibility to Contribute

You can contribute at any age if you are self-employed or a small business owner.

Maximum Annual Contribution

2015 tax year: As a small business owner you can contribute up to 25% of your compensation or $53,000, whichever is less.

If you have employees, you may be required to contribute for them as well.

Tax-Deductible Contributions

As a small business owner you can deduct your contributions for yourself and your employees from your company's federal taxable income.

Taxation of Earnings and Withdrawals

Tax-deductible contributions and earnings are taxed as ordinary income when withdrawn.

Types of Investments

  • Stocks, bonds, mutual funds and Advisory Products available through a Wells Fargo Advisors brokerage account.
  • Savings accounts and CDs (Time Accounts) available through Wells Fargo Bank, N.A., Member FDIC.

Minimum Initial Investment

Varies by investment option

Withdrawal Penalties

10% IRS early withdrawal penalty if withdrawn before age 59½ unless an exception applies.

Exceptions:

  • Death
  • Disability
  • Medical expenses in excess of 7.5% of AGI
  • Health insurance premiums if unemployed for 12 consecutive weeks
  • Qualifying higher education expenses
  • Qualifying first time home purchase ($10,000 lifetime limit)
  • Substantially equal payments made over life expectancy
  • Qualified military reservist

Required Withdrawals

Must begin at age 70½

Deadline to Set Up and Fund

You may establish and fund up through the business' tax filing due date plus extensions.

Commissions and Fees

Vary by account and investment option

Interested in learning more about SEP IRA plans?
Call us at 1-877-493-4727

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