SEP IRA

Simplified Employee Pension Plans (SEP IRAs) help self-employed individuals and small-business owners get access to a tax-deferred benefit when saving for retirement.


1. Key things to know

Who is eligible

Self-employed individuals or small-business owners, primarily those with only a few employees.2 Must be a sole proprietor, a business owner, in a partnership, or earn self-employment income by providing a service.
Tax benefits

Earnings are tax-deferred and contributions are tax-deductible.
Who contributes

Funded by employer contributions.
Contribution
amounts

Must be made by the employer and can vary each year between 0% and 25% of compensation (maximum $66,000 for 2023 and $69,000 for 2024). Each eligible employee must receive the same percentage.
Withdrawals

10% early withdrawal penalty may apply for withdrawals taken prior to age 59½ if no exceptions apply. Penalty-free withdrawals for qualifying first-time home purchase and certain college expenses. Required minimum distributions starting at age 73. Request a withdrawal
Investment
options

A wide range of mutual funds, stocks, bonds, ETFs, and more, depending on the investment type selected.
Administrative
responsibilities

Employee notification of employer's contribution. Employers must fill out and retain Form 5305 SEP (PDF) in their records. No plan tax filings with IRS. Each employee must open an individual SEP IRA account.

As an example, for a sole proprietor April 15 would typically be the deadline to establish and fund a SEP for the prior tax year. If an extension was filed a sole proprietor can establish and fund a SEP IRA by October 15.

For more information please see Maintaining your plan.
Deadlines

SEP IRAs must be established and funded by your tax filing deadline plus applicable extensions.
How to make
contributions

You may generally deposit checks by mail, through mobile deposit, online via a Bill pay service, via EFT, or call us for assistance. Always be sure to include your account number with your contributions. Please review the terms and conditions for the investment type that you select for more information on which features are available. Learn more

2. Open a SEP IRA

As hands-on or hands-off as you're looking for, we've got you covered when it comes to choosing a SEP IRA.

Select your own investments

Manage your own portfolio using our free planning tools.6


  • No minimum to open an account—invest with as little as $11
  • Choose from a broad range of investment options, including those designed for retirement such as target date funds

Get started

Investments personalized for you

Fidelity Go® is one of several managed account services that can help you with both financial planning and investing.


  • No minimum to open an account—invest with as little as $103
  • $0 advisory fee for balances under $25K (0.35% for balances of $25K+)4
  • Designed for investing goals of 3+ years

Get started

FAQs

  • Who is a SEP IRA appropriate for?
    • Small business owners who are comfortable making all of the contributions. The SEP IRA is funded only by employer contributions, not by employee salary deferral.
    • Self-employed individuals who are interested in contributing more to their retirement savings than a traditional or Roth IRA allows but do not want the administrative responsibilities of a 401(k).
    • An individual who participates in their employer's retirement plan can open a SEP IRA if they have self-employed income.
  • When is the SEP IRA not appropriate?

    If the business owner wants to have more restrictive eligibility requirements, or allow employees to participate in a salary deferral feature.

1. Contribute to account

You can use the Small Business Retirement Plan Contribution Calculator to calculate your annual contributions.

Contribution methods depend on the business structure, and include:

  • Mobile check deposit through Fidelity mobile app (account owner must log in to the app)
  • Electronic funds transfer (ETF) from a personal bank account (generally used solely for the business.)
  • On Fidelity.com from an individual account (generally used solely for the business)
  • By BillPay from a business bank account
  • By phone through a representative from a corporate account, and other accounts depending on business structure (certain limits apply)
  • By wireLog In Required

2. Transfer existing SEP IRA accounts to Fidelity

Transfer of assets

A transfer of assets (TOA) is when you transfer all or part of an account from one financial firm to another without selling your holdings. Transfers can occur only from like accounts i.e. a SEP IRA held elsewhere to a SEP IRA held at Fidelity.


Before you get started

Download a digital statement from your current firm so you can refer to important account information. You may need to upload a copy of this to complete the transfer process.


How long does a TOA take?

Typically, 3–5 business days depending on your current firm’s rules and the type of accounts and investments you’re transferring2.

Start a transferLog In Required


3. Roll over old workplace retirement accounts to Fidelity

If you have an old workplace retirement account such as a 401(k), you may have the option to roll it over into an IRA. Be sure to consult with a tax advisor before making a change to your retirement plan. If you decide to roll over assets, here are the steps:


Step 1: Open a SEP IRA

You can easily open a Fidelity SEP IRA online.

Note: To preserve all options to roll that money in the future into another retirement plan it may be more appropriate to roll the assets into a Rollover IRA that will not receive contributions.


Step 2: Contact your old retirement plan provider

Is your old retirement plan with Fidelity?

If so, you can do the entire rollover through your NetBenefits® account. You don't need any additional paperwork, and the money can be directly transferred.


Visit NetBenefits®Log In Required


Is your old retirement plan with a different provider?

If so, they will need to start the rollover process, so you'll need to either call them or initiate the process online. They may need some paperwork, such as a Letter of Acceptance (LOA) from Fidelity, or their own paperwork completed and signed by you or a Fidelity representative. If you have multiple accounts or employers, you may need more than one LOA.

Here are some questions to ask when you contact them.


Generate LOALog In Required


Step 3: Deposit your money into your Fidelity account

You can have the rollover check sent directly to us to deposit into your account, or you can deposit it yourself.

Ways to roll over funds to Fidelity:

  • Wire directly – When sending a direct rollover from an employer plan to a retirement account, include code DRC. Wire instructionsLog In Required.
  • Mobile check deposit – If a check is sent to you, you can use the Fidelity Investments app for your mobile check deposit.
  • Regular mail – Fidelity Management Trust Company, PO Box 770001, Cincinnati, OH 45277-0037.
  • Overnight mail – Fidelity Management Trust Company, 100 Crosby Parkway KC1H, Covington, KY 41015-0037
  • Bring to a Fidelity investor center – Find an investor center.

Please note: If a rollover check is made payable directly to you, you must deposit the money into your SEP IRA within 60 days of receiving the check to avoid income taxes and a possible early withdrawal penalty.


Need to speak with a Fidelity rollover specialist?

If you have questions or if you have shares of company stock call the number below to speak with a Fidelity rollover specialist.

800-343-3548

FAQs

  • Can I have a SEP IRA for my business if I also have a retirement plan at another job where I am not an owner?

    Yes

  • What are the eligibility requirements for a making a SEP IRA contribution?
    • Self-employed individuals or small businesses that are structured as sole proprietorships, partnerships, C corporations and S corporations can establish and contribute to a SEP IRA.
    • Employers can customize eligibility requirements within limits, and can change them from year to year.
      To be eligible an employee must:
      • Have reached age 21
      • Have performed services for your business in 3 or more of the last 5 years
      • Have received at least $750 in compensation from your business during the current year
      • Be covered under collective bargaining agreements
      • Be non-resident aliens that did not earn U.S. sourced income
    • The owner/employer is also considered an employee and must meet the same eligibility requirements.
    • For any contributions to be made, all eligible employees must be included.
  • Can I contribute to a SEP IRA and a traditional IRA or Roth IRA in the same year?

    Yes, you can contribute to both a SEP IRA and either a traditional IRA or Roth IRA (presuming you meet income limit requirements) in the same year. The deductibility of traditional IRA contributions may be impacted by the SEP IRA contribution.

  • How much can I contribute to my SEP IRA?
    • The maximum contribution is 25% of compensation.
    • The definition of compensation differs with business structure.
    • All eligible employees must receive the same percentage of compensation.
    • Use the SEP IRA Contribution Worksheet (PDF) to help you determine the amount you may be able to contribute.
  • How are SEP IRA contributions reported?

    Fidelity reports SEP IRA contributions on IRS Form 5498 in the year they are made, which may not be the deduction year. A common misconception is that the reporting should mirror the contribution year reporting for traditional and Roth IRAs. It is the employer's responsibility to claim the deduction for the appropriate tax year.

  • How do I select investments for my SEP IRA?
    • Employees are responsible for investing their own SEP IRAs. The employer has no further responsibility after making the contribution.
    • After funding the account, you can select from a wide range of investment options. These include Fidelity and non-Fidelity mutual funds along with stocks, bonds, ETFs, and CDs.
    • To learn more about your investment options
  • Can my account have automatic investments?
    • Inside the account you can establish automatic investments from the cash core to a mutual fund.
    • Sole proprietors can establish automatic contributions from a bank account by mailing a form.
    • You can send contributions by using a Billpay service that mails recurring checks from your business bank account. Monitor payments to avoid IRS penalties for over-contributing.

The list below of your responsibilities as a retirement plan sponsor does not necessarily cover all of your responsibilities. You may want to consult the IRS or a qualified tax advisor if you have additional questions.

Employer Responsibilities

  • 1. Establish your plan

    a. To establish your plan, you as the employer must fill out and retain Form 5305 SEP (PDF) by your business' tax filing deadline (including extensions, if filed). Each employee eligible for participation must open a SEP IRA account.


    Note: SEP IRA accounts are in the name of the participating employee only. Neither the company's name nor tax ID appear on the account. If you're the employer, you must obtain the account number and institution where the account is held from your employee to contribute on their behalf.

  • 2. Notify employees of employer contributions and contribute to the account(s)

    a. The deadline to contribute to your participants' accounts is your business' tax filing deadline plus extensions.


    • Contributions must be made by the employer and can vary each year between 0% and 25% of compensation (maximum $66,000 for 2023 and $69,000 for 2024). Each eligible employee must receive the same percentage.
    • If your business is unincorporated and you need help calculating you may use this SEP IRA Contribution Worksheet (PDF).
    • Funding for the company contribution should be done by the company only. To fund from a company account, you may send a check using this deposit slip (PDF).
      • If you choose to contribute from your personal account, you may set up electronic funding online or use our app for a mobile deposit. This may not be appropriate for a company contribution, please see your tax advisor with questions.
  • 3. Abide by the terms of the 5305-SEP

    a. Your plan's governing documents include: IRS form 5305-SEP and the Fidelity IRA Custodial Agreement and Disclosure Statements.


    Note: It's important to read the 5305-SEP; this is the IRS document that contains the rules for your plan. While there's typically no special tax filing for the SEP IRA, the 5305-SEP states that there are certain steps the employer must take to qualify for relief from the annual 5500 filing. The 5305-SEP covers what you need to know about your eligibility to offer this plan, the eligibility of employees, contribution limits, and more.

  • 4. Update your plan document

    If you change your plan from year-to-year, you'll need to fill out a new 5305-SEP form and retain it in your files along with all previous versions. If you are audited the IRS may ask you for your current contribution agreement and all previous versions.

  • 5. Correct errors of operation

    a. If an error is made operating your plan, it's your responsibility as the employer to make necessary corrections. You may wish to review the SEP IRA fix-it Guide from the IRS and/or consult a tax advisor.


    b. One of the most common errors is over contributing to an employee's SEP IRA. A good practice is to double check all contributions before making them. Over contributing can be hard to correct, costly and difficult to properly report to the IRS. If you find that you've over contributed and need to remove funds from the account(s), please fill out the SEP IRA Return of Excess Contribution Request form (PDF) and return it to Fidelity for processing. Note: Funds must be in cash to be distributed.

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Have more questions?

Call 800-544-5373 and say "Small Business Retirement"

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