Individual Retirement Accounts • SEP-IRAs • Eligibility • Contributions • Plan Administration • SARSEPs
A SEP (Simplified Employee Pension) is an IRA that may receive higher employer contributions. Any employer may establish a SEP — there is no size limit. Eligible employees must be age 21+, have worked for the employer in 3 of the past 5 years, and earned at least $800 (2026) during the year. The annual contribution limit is the lesser of 25% of compensation or $72,000 (2026), with compensation capped at $360,000. Contributions are deductible by the employer and excluded from the employee’s gross income. SEP benefits are 100% immediately vested. RMDs from a SEP-IRA must begin at age 73 (SECURE Act 2.0).
Model SEPs (Form 5305-SEP) require no IRS filing or approval. Non-model SEPs must be IRS-approved. Model SEPs may not be integrated with Social Security. Top-heavy SEPs (key employees receive >60% of benefits) require a minimum 3% contribution for non-key employees. Key employees are officers earning >$230,000 (2026), 5%+ owners, or 1%+ owners earning >$150,000. New SARSEPs have been prohibited since 1997; existing ones continue under pre-1997 rules with a $24,500 (2026) elective deferral limit.