What is a SEP IRA?

A SEP IRA (or Simplified Employee Pension plan) provides an easy, flexible, low-cost retirement option if you are self-employed or a partner or owner of a corporation. A SEP retirement plan is basically a Traditional IRA that allows you to make contributions for yourself and your employees.

A SEP IRA does not have the start-up and operating costs of a conventional employer plan. Nor do you have to contribute the same amount each year. You can make tax-deductible contributions of up to 25% of each employee’s compensation (if you’re self-employed, you’re considered an employee, allowing you to save for yourself).


Important features of a SEP IRA

  • Any size of business can use a SEP IRA
  • Employer contributions are discretionary and tax deductible
  • Required minimum distributions begin at age 70 ½

What are the eligibility requirements for a SEP IRA?

An individual can open and make contributions to a SEP IRA if the following requirements are met:

  • Reached age 21
  • Worked for employer for at least 3 of the last 5 years
  • Received at least $550 in compensation

An employer can also impose less restrictive eligibility requirements. You can establish eligibility requirements by completing an IRS 5305-SEP form.

An employer can exclude employees from coverage based on the following:

  • Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees union and the employer.
  • Nonresident alien employees who have received no U.S. source of wages, salaries, or other personal services compensation by the employer.

Is a self-directed SEP IRA the right plan for me?

How to determine if an Entrust self-directed SEP IRA is the right retirement plan for you:

  • Are you a sole proprietor, independent contractor, self-employed, partner, corporation, or S corporation?
  • Do you want to make contributions for yourself, as well as employees?
  • Do you want the flexibility to change contributions every year?
  • Do you want a small business plan with low administrative costs?
  • Do you want a wider range of investment choices, including real estate, notes, private placements, and LLCs?

If you answered 'yes' to all or most of these questions, a self-directed SEP IRA may be a good choice for you.


Transfer or Rollover your funds to Entrust to get started

A self-directed SEP IRA gives you freedom over your investment options.  If you're tired of the traditional options of stocks, bonds, and CDs, a self-directed SEP IRA will open the doors to real estate investments, commodity purchases, and more. 

As a business owner, you know how important it is to be agile and diversify. A self-directed SEP IRA allows you to do just that by giving you complete control of your investments, and broadening your choices into areas that you know and understand.

If you already have a SEP but it doesn’t allow self-direction, you can transfer all or part of the funds to an Entrust self-directed SEP IRA without penalty.  Contact us today to get started.


Related articles:

Before making contributions to a SEP IRA, learn the contribution limits that apply:

Click here to view the 2017-2018 SEP IRA Contribution Limits