SEP IRA

Yes. However, since an individual will be considered an active participant in an employer-sponsored retirement plan, some or all of their personal IRA contributions may not be deductible. Refer to the Contribution Limits & Deadlines table for more information.

If a business owner receives compensation as personal income, such as a sole proprietor or unincorporated partnership, the annual contribution limit is up to 20% of their net adjusted self-employed income or net adjusted business profits.

All employees age 21 or older who have worked for the business owner in three of the past five years and earn $650 or more must be included.

Generally distributions from a SIMPLE IRA are subject to the same distribution rules as a Traditional IRA. SIMPLE IRA distributions may be taken at any time and are taxable in the year distribution occurs. Withdrawals taken prior to age 59½ are subject to an additional 10% early distribution penalty. However, if a distribution from a SIMPLE IRA is taken within 2 years of first participation in the plan, the 10% early distribution penalty is increased to 25%.

Yes, a business owner can use less restrictive participation requirements than those listed by the IRS, but not more restrictive ones. For example, IRS participation requirements state that an employee must have worked for the company in at least three of the past five years. Employers are permitted to decrease or remove this requirement; however they are not permitted to increase it. This also applies to self-employed business owners.