SEP IRA

• 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.

If the business owner wants to have more restrictive eligibility requirements, or allow employees to participate in a salary deferral feature.

Yes

The notification requirements are clearly defined in the 5305-SEP form.

• 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.

Accounts can be opened online or by form. Call a retirement representative at (800) 544-5373 for assistance.

Employees are responsible for opening their own SEP IRA accounts and providing the account number to the employer.

• 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:
  • Reached age 21
  • Performed services for your business in 3 or more of the last 5 years
  • Received at least $600 in compensation from your business during the current year
• Employers can customize eligibility requirements within limits, and can change them from year to year.
  To be eligible an employee must be:
  1. covered under collective bargaining agreements
  2. non-resident aliens that did not earn U.S. sourced income
  3. 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.

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.

• 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.

• 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 

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.

• 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

• 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.

• 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 72.

You can make withdrawals from your SEP IRA using Fidelity.com, One time Withdrawal form or you can contact a retirement representative for help at (800) 544-5373.