![]() They also may bar nonresident alien employees who do not have U.S. Employers may exclude employees from their SEP IRA plan if the employees are part of a union agreement that includes retirement benefits. But the rules must uniformly apply to all employees. ![]() ![]() For example, they may enroll newly hired employees. Employers may, however, set less restrictive eligibility rules. To be eligible to participate in an employer's SEP IRA, the IRS says employees must be at least 21 years old, have worked at the business for three of the past five years and have earned at least $650 from the job in 2022. Also note: Contributions must be based only on the first $305,000 of an employee’s (or owner’s) compensation for 2022. The rate may change from year to year, a flexibility designed to help companies that may have differences in cash flow. So while these plans offer small business owners an opportunity to save much more for their own retirement than they could with a traditional IRA, the catch is they have to contribute funds at the same rate to SEP IRA accounts for all their eligible employees. But contribution rates are required to be uniform for all employees of a company that has a SEP IRA plan, including the owner. Like other individual retirement accounts, these contributions are tax deductible. (That's up from the maximum of $58,000 in 2021 and $57,0.) In comparison, a traditional IRA limits contributions to $6,0 for those younger than 50, or $7,000 for those 50 or older thanks to a $1,000 "catch-up" contribution. For 2022, a self-employed business owner effectively can salt away as much as $61,000 a year, but no more than 25% of their compensation. ![]()
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