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 2020 and 2019) 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 2020($6,000 in 2019). 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).
Investment and insurance products and services are offered through Osaic Institutions, INC. Member FINRA/SIPC. TMB Financial Solutions is a trade name of The Milford Bank. Osaic and The Milford Bank are not affiliated.
| NOT A DEPOSIT | NOT FDIC INSURED | NOT GUARANTEED BY THE BANK |
| NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | MAY GO DOWN IN VALUE | |
