SEP IRA

Simplified Employee Pension Plans (SEP IRAs) help self-employed individuals and small-business owners get access to a tax-deferred benefit when saving for retirement.

With Fidelity, you have no account fees and no minimums to open an account.1 You'll get exceptional service as well as guidance from our team.

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1. Key things to know

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.
Tax benefits

Earnings are tax-deferred and contributions are tax-deductible.
Who contributes

Funded by employer contributions.
Contribution
amounts

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.
Withdrawals

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
Investment
options

A wide range of mutual funds, stocks, bonds, ETFs, and more.
Fees

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.*†
Administrative
responsibilities

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.
Deadlines

SEP IRAs must be established and funded by your tax filing deadline plus applicable extensions.
How to make
contributions

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

Eligibility

Account Opening

Contributions

  • 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 
  • 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.

Investments

  • 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.

Withdrawals

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.

Employer responsibilities

1. Establish your plan

  1. 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 Fidelity.

    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)

  1. 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

  1. If an error is made operating your plan, it's your responsibility as the employer to make necessary corrections.
  2. 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.

Fidelity's responsibility

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

  1. 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.

  1. Choose your investments using our exceptional online tools and data. Our experienced representatives can also help you make an informed decision.
  2. For more information on how we can help you with investment management, planning and advice, please see What We Offer.

Helpful resources:

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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