IRA SEP Contribution Limits

SEP IRA contributions are limited to eligible employees in equal percentages.

Contributions to an employee IRA in a Simplified Employee Pension (SEP) are made entirely by employers. The contribution limits are determined based upon eligibility and equitable percentages among all participants.

Compensation Percentage

Employer contributions to the IRA of each employee in a SEP are limited to 25 percent of employee compensation.

The percentage contribution for each employee must be identical. No employee is entitled to receive a higher percentage than another employee.

Dollar Limit

Contributions may not exceed a specific dollar limit that is adjusted annually for the cost-of-living. The limit for 2010 is $49,000.

Excludable Employees

No SEP contributions are required for employees who may be excluded from the plan. All current employees who provided services in two of the past five years must be included unless they meet one of the exceptions. Any worker may be excluded who is under age 21, has retirement benefits under a union agreement with the employer, or earned less than $550 of compensation in 2010 (adjusted for inflation in future years.)

References

• Internal Revenue Service: Operating a SEP