Individual Retirement Accounts » SEP IRAs

2008 Contribution Limits and Deadlines

Contributions must be made based on a written formula and cannot discriminate in favor of highly compensated employees.

SEPs have a contribution allowance-up to 25% of eligible compensation or $46,000 for 2008, whichever is less. Contributions for self-employed individuals require a special calculation to determine earned income and takes into consideration 1/2 the employers self-employment tax liability.

All assets in a SEP become 100% vested immediately.

If a plan is "top-heavy," meaning that 60% or more of the SEP Contributions are made on behalf of key employees, the employer must contribute the lesser of 3% or the highest percentage contributed by any key employee on behalf of all non-key employees for each year the plan is considered to be top-heavy. Note: SEP IRA accounts may hold Rollover or Traditional IRA contributions which are not counted in the "top-heavy" calculation.

Contribution Deadlines

Employer Contributions to a SEP IRA must be made by the employer's tax filing deadline (plus extensions).