Simplified Employee Pension Plans, also known as SEP-IRA plans allow for greater contribution limits than a Traditional IRA. SEP-IRA plans are first established by an employer (possibly yourself) through the execution of a formal written agreement. The employer then makes tax-deductible contributions on behalf of all eligible employees (including yourself) into separate SEP-IRA accounts. Like Traditional IRAs, investment earnings grow tax-deferred until withdrawn.
The key advantage of a SEP-IRA is tax deductibility of employer contribution.
- 100% Vesting - Any money the employer contributes to a SEP-IRA belongs to the employee immediately
- Portability - If the employee leaves the company, all retirement contributions go with the employee
- Plan Simplicity - For the employer, no complicated forms need to be completed and the IRS does not require annual reports to be filed
- Employee Retention - Offering a retirement plan can make it easier to attract and retain valuable employees
SEP-IRA Contribution Flexibility
SEP contributions are made at the discretion of the employer; each year the employer decides whether or not to make contributions to the plan, as well as the amount to be contributed. Employers must contribute the same percentage of salary/wages to all eligible employees’ SEP-IRAs, including the employer. Furthermore, contributions in excess of applicable limits are subject to a penalty tax on the excess amount contributed.
Learn more about Simplified Employee Pension (SEP) Plans. To speak with an M&T Securities registered representative, contact us online, or stop by any M&T Bank branch today. We can also be reached at 1-800-724-9949.