How can you squirrel-away the most retirement savings?  If you’re self-employed you can do this easily with a SEP Plan.  First available in 1979, the Simplified Employee Pension (SEP) is an employer sponsored retirement plan that permits employers to make contributions into the employees’ Traditional IRA account. Someone might prefer this to setting up a 401k plan for the following reasons:

  • Less expensive to establish and easier to maintain.
  • Minimal IRS reporting
  • You have no employer fiduciary responsibilities for investments.
  • No ERISA (Employee Retirement Income Security Act) bonding requirements.
  • The employer receives tax deductions for contributions.
  • No non-discrimination testing. 

Many different organizations can form SEP’s.

  • Business entities such as Sole Proprietorships, partnership and corporations.
  • State and local governmental entities.
  • Tax-exempt organizations
  • Controlled group of business – An example of a controlled group could be if two or more trades or businesses are under common control.


  • The maximum contribution for 2019 is the lessor of 25% of employee income or $56,000. These contributions often increase annually so be sure to check before making a contribution.
  • When determining actual contributions, there are three methods:
    • Pro Rata- When each employee receives the same percentage of their income. This method is the only one not considered to be discriminatory.
    • Flat Dollar- When each employee receives the same amount.
    • Social Security Integration- It is a percentage based on the amount paid into Social Security each year.

You should always discuss what type of retirement plan is best for your business with your tax advisor. You can also learn more on the IRS website HERE.

Opening a SEP IRA with uDirect IRA Services means that you can invest your pre-tax savings in assets outside of the stock market. If you are interested in assets like rental property, loans or private companies, opening the SEP with a uDirect IRA Services allows you to take advantage of these asset classes.

We’re here to help!  Just email us at or call us at (866) 447-6598.

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