In short
A simplified employee pension (SEP) plan lets an employer, including a self-employed person, contribute up to 25% of each employee's compensation to their individual retirement accounts, up to an annual dollar limit.
Key takeaways
- For a self-employed person, the effective limit is 20% of net self-employment earnings.
- The same percentage must be contributed for all eligible employees.
- It can be set up and funded as late as the return due date, including extensions, and needs no annual filing.
Where it's tested
TCP: Retirement Planning Strategies — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A taxpayer has $90,000 in traditional IRAs, of which $9,000 represents nondeductible (after-tax) contributions. The taxpayer converts $10,000 to a Roth IRA. How much of the conversion is taxable?