One of the most appealing features of SEP-IRAs is the large amount you can put away for retirement. Simplified Employee Pension (SEP) plans are a type of tax-deferred retirement savings plan for the self-employed and small business owners. Employer contribution limits. SEP-IRA contributions are treated as part of a profit-sharing plan. SEP IRA for Employees. Contributions to an employee’s SEP IRA cannot exceed the lesser of either 25% of their compensation or $57,000 in 2020 or $58,000 in 2021. A SEP IRA for employees is a retirement plan option that allows very small businesses and entrepreneurs to defer up to $56,000 annually or 25% of their employees’ compensation. Establishment deadline If you decide to establish a SEP-IRA, you can contribute … That's up from a limit of $57,000 in 2020. With a SEP IRA, in 2021, an employer can contribute as much as 25% of an employee's gross annual salary or $58,000, whichever is less. The 2020 SEP IRA contribution limit is $57,000 and the 2019 SEP IRA contribution limit is $56,000. If you’re a high-income professional, such as a physician with your practice or a highly-paid consultant, or firm with critical employees, SEP IRA may not serve the purpose. Can vary each year between 0% and 25% of compensation (maximum $56,000 for 2019 and $57,000 for 2020), and each eligible employee must receive the same percentage. For example, if an employee earns $40,000 in wages, the employer could contribute up to $10,000 to the SEP-IRA account. Calculate how much you can contribute using our SEP IRA Contribution Worksheet (PDF). With a simplified employee pension plan, a business can make tax-free contributions to an individual retirement account for each of its employees. Only an employer can contribute to a SEP IRA, and they are required to make proportional contributions to all full-time employees. Contribution limits. A SEP IRA (Simplified Employee Pension) is a retirement plan that is popular with many small business owners and self employed individuals. A Simplified Employee Pension IRA, or SEP IRA, allows self-employed people and small-business owners to save up to $57,000 in 2020 for retirement. A SEP IRA is … For employees, the employer may contribute up to 25% of the employee's wages to the employee's SEP-IRA account. Contribution rules: Must be made by the employer. An eligible employee (including the business owner) who participates in their employer’s SEP plan must establish a traditional IRA to which the employer will deposit SEP contributions. You may contribute up to 25% of the employee's total compensation or a maximum of $57,000 for the 2020 tax year and $58,000 for the 2021 tax year, whichever is less. 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