What Is the Maximum Deposit for a SEP IRA?

SEP IRA stands for Simplified Employee Pension Plan Individual Retirement Account. This plan offers tax-deferred savings for retirement and, unlike traditional and Roth IRAs, permits employers to contribute to the plan.

Individual Contributions

SEP IRAs offer the same contributions for individuals as traditional IRAs. As of 2010, the maximum deposit into a SEP IRA equals $5,000 ($6,000 for people 50 and older).

Employer Contributions

Employers can contribute up to the smaller of 25 percent of the employee's pay for the year or the annual contribution limit. As of 2010, the annual contribution limit for employers equals $49,000.

Considerations

If an employer has another retirement plan for employees, such as a 401k plan, the employer contribution limits apply to both accounts cumulatively. For example, if in 2010 an employer contributed $25,000 to an employee's 401k plan, it could not contribute more than $24,000 to the employee's SEP IRA.

References

• Internal Revenue Service: Publication 590 - SEP IRAs
• Internal Revenue Service: Retirement Plans FAQs Regarding SEPs