What is a SEP plan contribution?

A simplified employee pension (SEP) plan is a retirement plan that allows employers to contribute to employees’ Traditional IRAs. SEP plan contributions are subject to different contribution limits than Traditional IRA contributions. Once an employer makes a SEP plan contribution to an IRA, all the general Traditional IRA rules and regulations apply. SEP plan contributions do not affect the individual's ability to make Traditional IRA contributions. The following characteristics apply to SEP plan contributions.

  • The maximum SEP plan contribution is the lesser of 25 percent of compensation up to $53,000 for 2015 and $53,000 for 2016.
  • SEP contributions are always 100 percent vested.
  • Eligible participants who are age 70½ or older may receive SEP plan contributions.
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