Pros and Cons of a SEP retirement plan

By • on June 29, 2010 • Filed under: Plan Participants, Plan Sponsors

Simplified Employee Pension Plans (SEP) are retirement plans designed for small companies or the self-employed meaning any type of business or professional practice with few employees. They are similar to SIMPLE plans in that SEPs offer tax-deferred investing, require minimal paper work and are relatively inexpensive to administer and run.


  • A SEP is simple and easy to establish
  • SEPs allow for larger contributions than a SIMPLE plan or conventional IRA
  • The plan is flexible with contributions year-to-year
  • If an employee participates in a traditional 401(k), contributions can still be made tax-deferred to a SEP


  • Every employee who meets the eligibilty requirements must have a SEP established in his/her name
  • For each year in which an employee makes a contribution, the employer must contribute on behalf of everyone who is eligible

Eligibilty Requirements:

  • Employee must be 21 years of age or older
  • The employee must have worked for the empoyer during at least three of the prior five years
  • As of 2010 the employee must have earned at least a minimum of $550 for the year

To become more familiar with the the available retirements for small business you can read IRS publication 560 located here:

For more information regarding SEPs or to setup a retirement plan please contact us at for a free consultation.

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