Create SEP IRAs for a Small Business

From AIG Funds

What are SEP IRAs?

A Simplified Employee Pension (SEP) is an employer-sponsored plan that allows small business owners to make contributions for their own retirement and their employees’ retirement. Under this plan, an individual retirement account (called a SEP IRA) can be created for each eligible employee, including the business owner. Anyone age 21 or older who has worked at the company for 3 out of the past 5 years and received at least $600 in compensation is an eligible employee.

Key benefits of a SEP IRA

  • Tax advantages for business owners and employees: Business owners make all contributions to SEP IRAs and can generally deduct the contributions from income tax. While employees cannot make contributions, they manage their own investments, and their money can grow tax-deferred until retirement.
  • Higher contribution limit: Employers can contribute and deduct up to $53,000 in 2015, which is significantly higher than many other IRAs. See IRA Contributions and Deductions at a Glance for details.  
  • Plan flexibility: Business owners have the ability to exclude certain employees from the plan. With SEP IRAs, there is no requirement to make ongoing contributions.


Contact your financial or tax advisor to learn more about creating SEP IRAs for your business.