SEP IRA Basics

• A SEP is a simplified employee pension plan. Unlike many other qualified retirement plans, contributions to a SEP IRA can only be made by the employer. Someone who is self-employed may contribute to their own SEP IRA because he is both the employee and the employer. The maximum contribution to a SEP IRA is 25 percent of compensation, up to $49,000.
  
  

SIMPLE IRA Basics

• A SIMPLE IRA is a small business retirement plan that allows employees to contribute to their own retirement savings via a salary contribution. The employer must either match the employee's contribution or make a flat, non-elective contribution to the employee's account. An employee may defer up to $11,500 per year, with those over 50 being eligible for a catch-up contribution of up to $2,500.
  
  

SEP IRA and SIMPLE IRA Rules for Employers

• Both SIMPLE IRA plans and SEP IRA plans must be established by a business. SIMPLE IRA plans are limited to businesses with no more than 100 employees. While SEP IRA plans are designed for small businesses, there is no hard limit on the number of employees allowed. A business with a SEP IRA is permitted to offer other qualified retirement plans. However, no other qualified retirement plans, such as a SEP IRA, are permitted during the year a business has a SIMPLE IRA plan.
  
  

Having Both SIMPLE and SEP IRA Plans

• Although both SIMPLE IRAs and SEP IRAs must be established by a business, the individual accounts are owned by the employees. As such, an employee working for two companies may have an active SIMPLE and SEP IRA. Furthermore, you can contribute to a SIMPLE IRA while keeping an existing SEP IRA, or vice versa.