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|Who is eligible||
Self-employed individuals or small-business owners, primarily those with only a few employees.2 Must be a sole proprietor, a business owner, in a partnership, or earn self-employment income by providing a service.
Earnings are tax-deferred and contributions are tax-deductible.
Funded by employer contributions.
Must be made by the employer and can vary each year between 0% and 25% of compensation (maximum $61,000 for 2022 and $66,000 for 2023). Each eligible employee must receive the same percentage.
NOTE: Due to the passing of the SECURE Act 2.0, for 2023, contributions made to your employees' SEP IRA or SIMPLE IRA could potentially reduce the amount you can contribute to your Roth IRA. Please consult your tax advisor with questions.
10% early withdrawal penalty may apply for withdrawals taken prior to age 59½ if no exceptions apply. Penalty-free withdrawals for qualifying first-time home purchase and certain college expenses. Required minimum distributions starting at age 73.3 Request a withdrawal
A wide range of mutual funds, stocks, bonds, ETFs, and more.
There is no opening cost, closing cost, or annual fee for Fidelity's SEP IRA. $0 commission for online US stock, ETF, and options trades.*†
Employee notification of employer's contribution. Employers must fill out and retain Form 5305 SEP (PDF) in their records. No plan tax filings with IRS. Each employee must open an individual SEP IRA account.
As an example, for a sole proprietor April 15 would typically be the deadline to establish and fund a SEP for the prior tax year. If an extension was filed a sole proprietor can establish and fund a SEP IRA by October 15.
For more information please see Maintaining your plan.
SEP IRAs must be established and funded by your tax filing deadline plus applicable extensions.
|How to make
You may deposit checks by mail, through mobile deposit, online via a Bill pay service, via EFT, or call us for assistance. Always be sure to include your account number with your contributions. Learn more
Who is a SEP IRA appropriate for?
- Small business owners who are comfortable making all of the contributions. The SEP IRA is funded only by employer contributions, not by employee salary deferral.
- Self-employed individuals who are interested in contributing more to their retirement savings than a traditional or Roth IRA allows but do not want the administrative responsibilities of a 401(k).
- An individual who participates in their employer's retirement plan can open a SEP IRA if they have self-employed income.
When is the SEP IRA not appropriate?
If the business owner wants to have more restrictive eligibility requirements, or allow employees to participate in a salary deferral feature.
Can I have a SEP IRA for my business if I also have a retirement plan at another job where I am not an owner?
How do I notify employees if they are eligible?
The notification requirements are clearly defined in the 5305-SEP form.
What administrative responsibilities does the SEP IRA sponsor have?
- The employer must fill out and retain IRS Form 5305 SEP for their records
- The employer is required to notify the employee of any contributions made. Notification requirements are described in IRS Form 5305-SEP.
- There are no SEP IRA-specific employer tax filings (unlike a 401(k)).
- Employers deduct SEP contributions on their business tax filing.
- SEP IRA contributions are made at the discretion of the employer, and are not required to be annual or ongoing.
- An employer may establish a SEP IRA for an employee who is entitled to a contribution under the SEP plan even if the employee is unable or unwilling to establish a SEP IRA per IRS rules. See 5305-SEP
- See Maintaining your plan for more information.
How do I open a SEP IRA account?
Accounts can be opened online or by form.
How do I open an account for my employee?
Employees are responsible for opening their own SEP IRA accounts and providing the account number to the employer.
What are the eligibility requirements for a making a SEP IRA contribution?
- Self-employed individuals or small businesses that are structured as sole proprietorships, partnerships, C corporations and S corporations can establish and contribute to a SEP IRA.
- Employers can customize eligibility requirements within limits, and can change them from year to year.
To be eligible an employee must:
- Have reached age 21
- Have performed services for your business in 3 or more of the last 5 years
- Have received at least $600 in compensation from your business during the current year
- Be covered under collective bargaining agreements
- Be non-resident aliens that did not earn U.S. sourced income
- Be employees who receive less than $450 in compensation
- The owner/employer is also considered an employee and must meet the same eligibility requirements.
- For any contributions to be made, all eligible employees must be included.
Can I contribute to a SEP IRA and a traditional IRA or Roth IRA in the same year?
Yes, you can contribute to both a SEP IRA and either a traditional IRA or Roth IRA (presuming you meet income limit requirements) in the same year. The deductibility of traditional IRA contributions may be impacted by the SEP IRA contribution.
How much can I contribute to my SEP IRA?
- The maximum contribution is 25% of compensation.
- The definition of compensation differs with business structure.
- All eligible employees must receive the same percentage of compensation.
- Use the SEP IRA Contribution Worksheet (PDF) to help you determine the amount you may be able to contribute.
What are the best methods for making contributions in my SEP IRA account?
- Contribution methods depend on the business structure, and include:
- Mobile check deposit through Fidelity mobile app (account owner must log in)
- Electronic funds transfer (ETF) from a personal bank account (generally only for sole proprietors.)
- On Fidelity.com from an individual account (only for Sole Proprietors)
- By check, mailed or deposited at an investor center. (Deposit Slip) If funding multiple accounts with one check, please include a spreadsheet with the instructions to split between accounts.
- By BillPay from a business bank account that mails a check
- By phone through a representative from a corporate account, and other accounts depending on business structure (certain limits apply)
- By wire
- Contribution methods depend on the business structure, and include:
How are SEP IRA contributions reported?
Fidelity reports SEP IRA contributions on IRS Form 5498 in the year they are made, which may not be the deduction year. A common misconception is that the reporting should mirror the contribution year reporting for traditional and Roth IRAs. It is the employer's responsibility to claim the deduction for the appropriate tax year.
How do I select investments for my SEP IRA?
- Employees are responsible for investing their own SEP IRAs. The employer has no further responsibility after making the contribution.
- After funding the account, you can select from a wide range of investment options. These include Fidelity and non-Fidelity mutual funds along with stocks, bonds, ETFs, and CDs.
- To learn more about your investment options
Can my account have automatic investments?
- Inside the account you can establish automatic investments from the cash core to a mutual fund.
- Sole proprietors can establish automatic contributions from a bank account by mailing a form.
- You can send contributions by using a Billpay service that mails recurring checks from your business bank account. Monitor payments to avoid IRS penalties for over-contributing.
What are the rules for withdrawing money from my SEP IRA?
- The rules for withdrawal are the same as for a traditional IRA.
- Assets in the account can be withdrawn at any time, however a 10% early withdrawal penalty may apply if you are under the age of 59 ½, unless one of the penalty waivers applies (see IRS Publication 590-B). Minimum distributions are required starting at age 73.
How do I make withdrawals?
You can make withdrawals from your SEP IRA online, or by using our one time withdrawal form.
Maintaining your SEP IRA plan
A Simplified Employee Pension plan (SEP IRA) is a small business retirement plan, appropriate for sole-proprietors, corporations or partnerships that are either owner only or small businesses with only a few employees. A SEP IRA may be the easiest small business plan to set up and maintain, but there are steps you must take to ensure you're running the plan properly. The list below doesn't necessarily cover all of your responsibilities. You may want to consult the IRS or a qualified tax advisor if you have additional questions.
1. Establish your plan
- To establish your plan, you as the employer must fill out and retain Form 5305 SEP (PDF) by your business' tax filing deadline (including extensions, if filed). Each employee eligible for participation must open a SEP IRA account. A link to the SEP IRA application can be found here: Open an Account with FidelityLog In Required.
Note: The SEP IRA accounts are in the name of the participating employee only. Neither the company's name nor tax ID appear on the account. If you're the employer, you must obtain the account number and institution where the account is held from your employee so you can send in their contribution.
2. Notify employees of employer contributions and contribute to the account(s)
- The deadline to contribute to the participants' accounts is your business' tax filing deadline plus extensions.
- Contributions must be made by the employer and can vary each year between 0% and 25% of compensation (maximum $61,000 for 2022 and $66,000 for 2023). Each eligible employee must receive the same percentage.
- If your business is unincorporated and you need help calculating you may use this worksheet SEP IRA Contribution Worksheet (PDF).
- Funding for the company contribution should be done by the company only. To fund from a company account, you may send a check using this deposit slip (PDF).
- If you choose to contribute from your personal account, you may set up electronic funding online or use our app for a mobile deposit. This may not be appropriate for a company contribute, please see your tax advisor with questions.
3. Abide by the terms of the 5305-SEP
Note: It's important to read the 5305-SEP; this is the IRS document that contains the rules for your plan. While there's typically no special tax filing for the SEP IRA, the 5305-SEP states that there are certain steps the employer must take to qualify for relief from the annual 5500 filing. The 5305-SEP covers what you need to know about your eligibility to offer this plan, the eligibility of employees, contribution limits, and more.
4. Update your plan document
If you change your plan from year-to-year, you'll need to fill out a new 5305-SEP form and retain it in your files along with all previous versions. If you are audited the IRS may ask you for your plan document.
5. Correct errors of operation
- If an error is made operating your plan, it's your responsibility as the employer to make necessary corrections.
- One of the most common errors is over contributing to an employee's SEP IRA. A good practice is to double check all contributions before making them. Over contributing can be hard to correct, costly and difficult to properly report to the IRS. If you find that you've over contributed and need to remove funds from the account(s), please fill out the SEP IRA Return of Excess Contribution Request form (PDF) and return it to Fidelity for processing. Note: Funds must be in cash to be distributed.
1. Maintain accounts
Fidelity will provide individual brokerage SEP IRA accounts for your eligible employees on our platform as well as the Custodial Agreement and other terms that outlines the rules and agreement for the plan.
2. Prepare tax forms for employees
- IRS tax form 5498 each year there is activity in the account (including contributions).
Note: Per IRS rules, we don't report what year your contribution is for, only the year the contribution is received. For example: in February of 2023, a contribution may be made for the tax year 2022. This contribution will appear on the 2023 5498 that will be available early in 2024. See the IRS instructions for the 5498 for more information IRS 10990-R and 5498 Instructions.
- IRS tax form 1099 R for the year distributions or rollovers are processed out of a SEP IRA account.
3. Offer planning and investment guidance to your eligible employees.
- Choose your investments using our exceptional online tools and data. Our experienced representatives can also help you make an informed decision.
- For more information on how we can help you with investment management, planning and advice, please see What We Offer.
1. SEP IRA Return of Excess Contribution Request (PDF)
2. IRS 10990-R and 5498 Instructions (PDF)
3. What We Offer
4. IRS SEP IRA
5. IRS SEP IRA fix-it guide
6. Employee Plans Compliance Resolution System (EPCRS)
7. IRS SEP IRA FAQs
8. Retirement plans for small business (PDF)
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$0.00 commission applies to online U.S. equity trades, exchange-traded funds (ETFs), and options (+ $0.65 per contract fee) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. Other exclusions and conditions may apply. See Fidelity.com/commissions for details. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Institutional® are subject to different commission schedules.
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
No account fees or minimums to open Fidelity retail IRA accounts. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs), and commissions, interest charges, and other expenses for transactions, may still apply. See Fidelity.com/commissions for further details.
The change in the RMDs age requirement from 72 to 73 applies only to individuals who turn 72 on or after January 1, 2023. After you reach age 73, the IRS generally requires you to withdraw an RMD annually from your tax-advantaged retirement accounts (excluding Roth IRAs, and Roth accounts in employer retirement plan accounts starting in 2024). Please speak with your tax advisor regarding the impact of this change on future RMDs.
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