Lund & Guttry LLP

36917 Cook Street Suite 102, Palm Desert, CA 92211


Phone:  760-568-2242

Fax:      760-346-8891



September 2019

Meet The Simplified Employee Pension (SEP)

Meet The Simplified Employee Pension SEP

With open enrollment season upon us and the end of the tax year coming for most businesses, now is a good time to explore your company’s current or future retirement plan options. For sole proprietors and smaller businesses, a Simplified Employee Pension (SEP) is often among the most attractive options.

While small business owners have other options, few offer the generous limits of the SEP. In 2019, you can contribute up to the lesser of 25% of employees’ annual compensation or $56,000, indexed to inflation. If you are a sole proprietor, your compensation is determined by your net earnings from self-employment. Consult your tax professional.

In this nonelective plan, employees must receive an employer SEP contribution if they are at least age 21, have worked for the company at least three of the past five years and will be paid at least $600 this year. Plans are allowed to have less restrictive requirements to include younger or newer employees.

Employers do not have to make a contribution to the plan every year, as is required by some other qualified retirement plans. Additionally, startup and administrative costs are very reasonable.


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