What is a SEP IRA account?
A simplified employee pension (SEP) is established by an employer or a self-employed person. The employer is allowed a tax deduction for contributions to each eligible employee’s plan on a discretionary basis. Eligibility requirements for contributors include:
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Has reached age 21
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Has worked for the employer in at least 3 of the last 5 years
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Received at least $750 in compensation for 2023 and for 2024 ($650 in compensation for 2021 and for 2022 from the employer during the year and $600 for 2019 and for 2020
The SEP IRA allows employers to skip contributions during years when business is down. Contributions made by employers are limited annually to the smaller of $69,000 for 2024 or 25% of compensation.