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Simplified Employee Pension Plan

A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small-business owners. Its key features are highlighted below. When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA; employer contributions are then made into each eligible employee's SEP-IRA.

Plan Eligibility

You can establish a SEP-IRA if you:

  • are a sole proprietor, in a partnership, or a business owner (of either an unincorporated or incorporated business, including Subchapter S corporations);
  • earn more than $750 in 2023 and 2024 of self-employed income by providing a service, either full-time or part-time, even if you are already covered by a retirement plan at your full-time job.

Tax advantages

Tax-deductible contributions

  • Up to 25% of compensation, as much as $66,000 for 2023, and $69,000 for 2024.¹

Tax-deferred growth potential

  • Any investment earnings grow tax-deferred until withdrawn.

SEP-IRA Deadline

The deadline to open and contribute to a SEP-IRA is your tax filing deadline (including any extensions). For most self-employed individuals and small-business owners, that deadline is usually April 15.²

Contribution Flexibility

No annual contribution required.

  • Contribution percentage can vary each year, from 0%–25% of compensation, up to $66,000 per participant for the 2023 plan year, and $69,000 for the 2024 plan year.¹
  • All SEP-IRA contributions must be made by the employer, and the same percentage of compensation must be contributed for each eligible employee (based on W-2 wages) including the employer.

Other Key Advantages

  • No complicated forms to fill out
  • No annual reports for you to file with the IRS
  • Contributions are not mandatory each year
  • Ability to offer another qualified retirement plan in addition to the SEP-IRA

Step by Step: Setting Up a SEP-IRA

Employer

The following steps need to be completed:

  1. Fill out and sign IRS Form 5305-SEP

    This is the fundamental form of the SEP plan as it certifies and records your decisions in the formation of your SEP plan. Give each eligible employee a copy of your completed Form 5305-SEP, and the other information listed in the form's instructions. This form does not need to be filed with the IRS, only kept for your, and Saturna's, records.

  2. Have each employee in the plan fill out and sign a Saturna SEP-IRA Application

    This document establishes the IRA with Saturna that is contributed to by the employer. It allows for the employee to choose how they would like their IRA to be invested, and to indicate beneficiaries. The employee should retain the Saturna IRA Brochure, as it includes valuable information regarding our plans. This application needs to be signed and returned to Saturna Capital Corporation.

  3. Have each employee in the plan fill out and sign a IRS Form 5305

    This document establishes the employee's IRA with the IRS. This document needs to be signed and returned to Saturna Capital Corporation.

  4. Fill out the Saturna SEP Contribution Allocation Form

    This form designates the amount of your contribution and the percentage (or amount) allocated to your participating employees.

Employee

The following steps need to be completed:

  1. Fill out and sign the SEP-IRA Application
    • Enter Name, Address, DOB, SSN
    • Indicate Primary Beneficiary Designation
    • Choose a fund(s) to invest in
    • Include a copy of government-issued identity document
    • Sign and Date
  2. Fill out and sign IRS Form 5305
    • Name, Address, DOB, and SSN info in boxes
    • Sign the form
  3. Return all documents to your company's administrator

¹ The maximum compensation on which contributions can be based is $330,000 for 2023, and $345,000 for 2024. For self-employed individuals, compensation means earned income.

² Per IRS instructions, Saturna Capital is required to report all SEP contributions according to the calendar year in which they are received. However, you can still claim the contribution for the prior year. For example, if you make a 2023 contribution to your SEP IRA on March 1, 2024, Saturna Capital is required to report the contribution to the IRS for 2024, however you can still claim the contribution on your 2023 tax return, assuming all other requirements are met.